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Charles Schwab is in talks to buy TD Ameritrade, a source told CNBC’s Becky Quick on Thursday. A deal could be announced as early as today.
Shares of TD Ameritrade soared 20% in premarket trading on the report. Schwab’s shares slipped 3%.
A deal between Schwab and TD Ameritrade would consolidate an industry that has been going through massive disruption. In recent months, all of the major brokerages have announced plans to go to zero commissions.
Schwab was the first of the major players to make the move, eliminating commissions in early October. Schwab’s competitors, including Fidelity and TD Ameritrade, were quick to follow.
Calls to Schwab and TD Ameritrade weren’t immediately returned.
Not charging for trades is a boon for consumers, but it’s left the brokerages scrambling to find ways to maintain profits. A deal between Schwab and TD Ameritrade would create a behemoth with $5 trillion in combined assets.
Major brokerage firms have been pressured to go to zero fees since 2013 when Silicon Valley start-up Robinhood offered stock trading for free. Since then, Vanguard Group slashed fees on exchange-traded funds trades and J.P. Morgan Chase started its own free trading app. Interactive Brokers also announced a commission-free product called IBKR Lite. Other players include ETrade Financial.
Schwab and TD Ameritrade are the two biggest publicly traded discount brokers. Schwab has a market capitalization of $57.5 billion, and Ameritrade has a $22.4 billion market cap,
Shares of discount brokers rose on hopes for further consolidation in the sector, with Interactive Brokers up 3.3% and E-Trade surging 6.8%.
—CNBC’s Maggie Fitzgerald contributed to this report.