Building an online trading oligopoly
E-Trade Financial announced the acquisition of BrownCo, the online brokering division of megabank JPMorgan Chase for $1.8 billion. BrownCo has 200,000 customers with an average of $145,000 in their account each. The move, from JPMorgan Chase's side is a part of a move away from non-central; financial services by the banking industry.
For E-Trade is part of series of acquisitions that have grown the company over the past few years. E-Trade is going a bit in the other direction, from being an online trading firms to being a larger financial services company, with banking and equity management services.
While E-Trade offered to buy rival Ameritrade for $6 billion this year, the offer was turned down, and Ameritrade bought rival TD Warehouse from the Toronto Dominion Bank. E-Trade had also made a serious bid for TD Waterhouse, one that fell through at the last minute.
While both E-Trade and Ameritrade have survived the internet day-trading bubble and are getting stronger, #1 discount broker Charles Schwab is in decline. Ameritrade now outsells it in online brokerage, though Schwab still is twice as large in overall sales (through its brick-and-mortar operations.). The recent E-Trade deals make it bigger than both Schwab and Ameritrade. The one other significant online broker is Fidelity investments.
Schwab, which has lost market share, is caught in the middle. It does not and cannot offer the full services of the mainline brokers like Smith Barney and Merrill Lynch, but it also cannot match the leaner operations of Ameritrade and E-Trade.
The BrownCo move follows E-Trade's acquisition of yet another discount broker Harrisdirect from BMO Financial Group (Bank of Montreal) for $700 million. The company has 430,000 clients with an average balance of $70,000.
E-Trade Financial also recently bought Kobren Insight Management, a regional US investment firm. Kobren, based in Massachusetts, manages over a billion dollars in private client accounts. Sale price was not disclosed.
3:33:28 PM 
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