I’m not surprised that smaller trading firms attract the attention of the larger brokerages and banks. ING Direct acquired ShareBuilder (see my ShareBuilder review) in 2007. Today, OptionsXpress (see my OptionsXpress review) has announced that it will be acquired by Charles Schwab for $1 billion.
OptionsXpress is one of the best discount brokerages, offering low fees, particularly for trading options, the obvious focus of the brand. Schwab and OptionsXpress will continue to operate under their own brands as they do today, and I expect the integration for the time being will be similar to that between ING Direct and ShareBuilder, with linked accounts and immediate transfers, but separate platforms.
From the press release:
“The combination of optionsXpress and Schwab will offer active investors an unparalleled level of service and platform capabilities. optionsXpress’ industry-leading and award-winning client tools will be well received by our existing active investor clients who are increasingly using options and other trading strategies as a key part of their total approach to investing,” said Walt Bettinger, Schwab President and Chief Executive Officer.
There’s quite a bit of marketingspeak in the press release, but the bottom line is that each company see this as a way to take advantage of the other company’s strengths and cut back their expenses at the same time.
I don’t believe this will be the last acquisition we’ll see in this space. Larger brokerages — even those that consider themselves “discount brokerages” — see the advantage that online-only small brokerages offer. It may be a different type of customer, perhaps younger, who prefer using online tools and doing their own research. While that has been the model of larger discount brokerages, their institutional type of brand hasn’t translated well to the needs and preferences of Generation Y and younger investors.
Published or updated March 28, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.
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Luke Landes founded Consumerism Commentary in 2003 and has been building online communities since 1990. Luke, also known as Flexo, has contributed to PC World Magazine, US News, Forbes, and other publications. 
{ 6 comments… read them below or add one }
I wonder whether this will change the fee structure or otherwise affect Options Express?
I knew that it was only a matter of time before OptionsXpress would be bought out by the larger companies; mainly because they were becoming a nuisance. I’m sure that within a year, the fees will be going up and their “feel” will be that of Schwab.
Probably is aimed at the younger investor who is used to trading online and has the guts for options trading. Might be a good match as Schwab is an old, established name—-I don’t know.
Options Express did not even put the bid out there to other companies. They just took Schwab’s offer. Is that legal? And now there are some class action suits pending against Options Express for not putting their company out to bid. Will that lower the value of the stocks?
Great just one more company they can screw up…..
E*TRADE is next. It will be interesting to see how Schwab handles the pricing structure Options.