Morgan Stanley to Buy E-Trade for $13B
nytimes.com
Morgan Stanley to Buy E-Trade for $13B
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Re: Morgan Stanley to Buy E-Trade for $13B
#2As soon as everyone started going to $0 commissions overnight I feel like consolidation was inevitable.
Re: Morgan Stanley to Buy E-Trade for $13B
#3With the move to $0 order fees for online brokerages, not surprised to see more tie-ups. Even running the business at break-even, MS gets to market their other products to all E-Trade's customers.
That said, what's the current economic model for independent online brokerages?
Sell order flow? Rate arbitrage off uninvested assets?
Re: Morgan Stanley to Buy E-Trade for $13B
#4Aw man, I just got moved from Capital One 360 Investing to E-Trade. Now I'll have to move to Morgan Stanley? Any way to just transfer my sh*t from E-Trade to Robinhood without just selling and re-buying, incurring a change in tax status? Seems Robinhood has unfortunately sunset that option...
Re: Morgan Stanley to Buy E-Trade for $13B
#5Aw man, I just got moved from Capital One 360 Investing to E-Trade. Now I'll have to move to Morgan Stanley? Any way to just transfer my sh*t from E-Trade to Robinhood without just selling and re-buying, incurring a change in tax status? Seems Robinhood has unfortunately sunset that option...
Try Firstrade
Re: Morgan Stanley to Buy E-Trade for $13B
#6With the move to $0 order fees for online brokerages, not surprised to see more tie-ups. Even running the business at break-even, MS gets to market their other products to all E-Trade's customers. That said, what's the current economic model for independent online brokerages? Sell order flow? Rate arbitrage off uninvested assets?
Matt Levine has said the majority of online brokerage revenue is from collecting interest on cash balances.
Re: Morgan Stanley to Buy E-Trade for $13B
#7With the move to $0 order fees for online brokerages, not surprised to see more tie-ups. Even running the business at break-even, MS gets to market their other products to all E-Trade's customers. That said, what's the current economic model for independent online brokerages? Sell order flow? Rate arbitrage off uninvested assets?
There was a somewhat revealing interview by the people behind Flatex, a big discount broker from Germany [0].
Dutch source, do use a translator https://www.tijd.be/markten-live/nieuws/algemeen/nieuwe-eige...
"Is it easier for a pan European company to keep big US competition like Robin Hood and Ameritrade out?
Niehage: 'The companies you name are very badly positioned for Europe. Their economic model is based on two pillars. Firstly, they want to offer everything for free. But if you offer all services for free, you have to earn money with the capital in the investors' accounts. That is possible in the US, where you can still get 2% of interest. In Europe, with zero interest rates, that's very different.'
And the second pillar of their economic model?
Niehage: 'That's the high frequency traders. As far as I know, Robin Hood sells its customer orders to this kind of parties. They are prepared to pay good money for that. According to the European MiFID II-regulation, that is illegal. Those two examples show that the US and EU markets are totally different. That's why American brokers have difficulties breaking into the EU market.' "
Re: Morgan Stanley to Buy E-Trade for $13B
#8Aw man, I just got moved from Capital One 360 Investing to E-Trade. Now I'll have to move to Morgan Stanley? Any way to just transfer my sh*t from E-Trade to Robinhood without just selling and re-buying, incurring a change in tax status? Seems Robinhood has unfortunately sunset that option...
You can transfer stocks, Robinhood implemented that a 12-18 months ago (and E*TRADE has/had it)
Re: Morgan Stanley to Buy E-Trade for $13B
#9Aw man, I just got moved from Capital One 360 Investing to E-Trade. Now I'll have to move to Morgan Stanley? Any way to just transfer my sh*t from E-Trade to Robinhood without just selling and re-buying, incurring a change in tax status? Seems Robinhood has unfortunately sunset that option...
I would think an ACATS transfer should be available for any registered US broker. That would not involve selling and re-buying.
Re: Morgan Stanley to Buy E-Trade for $13B
#10I rely on Matt Levine to explain, more clearly than I could, how brokerages make money ("The Trades Will Be Free Now"):
https://www.bloomberg.com/opinion/articles/2019-10-02/the-tr...
Let me highlight a key passage:
"Even this understates the change, because the actual way that stock brokers work today is that you keep some cash in your brokerage account to fund potential trades, and the broker earns interest on that cash and pays you less than it earns, and all the trading stuff is almost irrelevant. ... Commissions are way down there; in 2018, they represented a bit less than 7% of Schwab’s net revenue."
I don't think this is about consolidation in the brokerage space because of zero fees. I think this is about investment banks getting into the retail space (see Goldman's Apple card).
Once again, I rely on Matt Levine to explain it ("Goldman Has Some Boring Plans"):
https://www.bloomberg.com/opinion/articles/2020-01-29/goldma...
The whole thing is worth a read, but here is one key paragraph:
"One way to interpret this is that Goldman has embarked on a quest to be boring. This interpretation seems plainly correct. The old Goldman approach—making a lot of money on lumpy investment-banking fees, risky balance-sheet-intensive trading, and both-lumpy-and-risky principal investing—is disfavored in modern banking. It is disfavored by regulation (the Volcker Rule, capital requirements) and by market conditions, but it is also particularly disfavored by Goldman’s own investors, who want reliable recurring revenues."
Edit: I should add this interpretation is also the one offered by the author of the NY times article, although the author also claims that slashed fees played a role:
"It continues Morgan Stanley’s strategy of increasingly focusing on asset management rather than investment banking and high-stakes trading, betting on steady fees over bigger paydays and bigger risks."