The summer Olympics are just around the corner and with them will come all kinds of excitement, fanfare and of course, the widely anticipated opening ceremonies. While there aren’t typically flag bearers, parades, fireworks or exotic choreography, there are a handful of Canadian discount brokerages who try to make opening an online trading account feel exciting.
In this week’s roundup we take a look at some interesting maneuvers in the US online trading space that signals where online brokerages might be looking for opportunity to grow their top (and bottom) line. From there we’ll take a quick look at the promotions set to expire heading into August to see which deals stay and which ones don’t make the cut. We’ll also take a look at what investors were thinking and talking about this past week on social media and investor forums.
E*Trade Exercises Options to Buy OptionsHouse
All across the board in the US, there are signs that some of the final shackles of the great recession are finally coming loose.
In the online brokerage space, one of the brokerages that was heavily impacted by subprime lending practices (E*Trade Financial) finally took the milestone step of acquiring a competing brokerage, OptionsHouse, for $725M USD. The good news for E*Trade is that they were in a financially strong enough point to raise the funds and move forward instead of backward.
E*Trade wants to further entrench itself with the active trader community and their latest move does just this. In particular, E*Trade will be gaining a reasonably profitable and active trading client base that tends to trade considerably more than their existing clients. Options trading capabilities are also more profitable a product.
Now that OptionsHouse is part of a publicly traded company, we can get a glimpse of its numbers. According to E*Trade’s press release, OptionsHouse clients have $3.6B USD in assets. 63% of the firm’s volume is options and they did about $675 in revenue per account last year (154k accounts and $104M).
The acquisition puts to work about 44% of E-Trade’s idle cash and cash equivalents. The firm will still have over $900M USD in cash after the purchase.
But E*Trade is not only getting OptionsHouse – there’s also a perk of the talent coming with it.
General Atlantica, private equity firm, saw an opportunity to consolidate the brokerage business in late 2014. The firm bought OptionsHouse and merged it with another acquisition, tradeMONSTER.
Both firms specialized in options. tradeMONSTER was cofounded by the Najarian brothers who frequently appear on CNBC as trading personalities. OptionsHouse on the other hand was founded by PEAK6 – a large proprietary trading firm in Chicago, located in the historic CBOT building. General Atlantic, merged tradeMONSTER and OptionsHouse to form Aperture Group in January of 2015.
Now just about a year and a half later, General Atlantic is calling on their inner trader to flip this to E-Trade.
While we don’t know General Atlantic’s cost basis, there’s a good chance they are in the green.
Heading into Expiry
With only a few more days left in July, the new deals cycle is almost here. While deals and promotions from Canadian discount brokerages have been lighter this spring/summer compared to last, there are still signs that there may be more deals on their way in August.
For instance, Virtual Brokers, who had not been active in the deal space for quite some time, has now launched several offers in 2016. It seems likely that Virtual Brokers will be pursuing new accounts and promotions a bit more actively in the past.
At the other end of the size spectrum, TD Direct Investing this week held a snap one-day promotion for clients. The offer included one commission-free trade as part of a ‘client appreciation’ maneuver. With the promotional landscape having thinned out, it was remarkable that TD was the one rolling out the deal.
In the meantime, there are a couple of deals from larger bank-owned brokerages BMO InvestorLine and Scotia iTRADE that were slated to expire at the end of the month. For its promotion, BMO InvestorLine actually pushed out an extension to the promotion so that it now expires at the end of August. For Scotia iTRADE, there haven’t been any extensions (yet) on deals related to new accounts.
With a long weekend for many Canadians falling on August 1st it will be interesting to see which brokerages are actually going to update the deals sections on their sites on (or before) the turn of the new month.
Discount Brokerage Tweets of the Week
Another week and another set of platform outages. This past week there was a significant outage with Scotia iTrade which got a lot of active traders (understandably) fired up.
Mentioned this week were Questrade, Scotia iTRADE, TD Direct Investing, and Virtual Brokers.
From the Forums
Pros and Cons: Comparing Questrade and Virtual Brokers
Even though pricing changes have forced an evolution for Virtual Brokers’ price point, there are still common questions on how Questrade compares to Virtual Brokers. In this post from reddit, it was interesting to see one how one user broke down their experiences with both these popular discount brokerages.
Out of Orders
As mentioned above, this past week Scotia iTRADE’s trading system went down – much to the chagrin of many clients. In this post from RedFlagDeals.com’s personal finance section, multiple users chimed in on the experience with Scotia as well as the help.
Into the Close
That’s a wrap for another edition of the roundup. Have a safe and happy holiday weekend and remember that Canadian markets are closed on Monday.