Online brokers seal $2.9bn merger

Online share trading has yet to recover from the dotcom crash

Online share trading service Ameritrade is likely to buy rival TD Waterhouse USA for $2.9bn (£1.6bn), in a move that is like to spark sector consolidation.

Online share trading firms have seen business decline since the dotcom crash in mid-2000.

The merged firm will have 5.9 million account holders, executing 239,000 trades a day.

TD Waterhouse is being sold by Toronto-Dominion bank, which will keep a 32% shareholding in the merged firm.

The new company will be known as TD Ameritrade and will be the biggest online broker measured by transaction volumes and the third biggest by customer base, the two merger partners said.

Online share trading makes up about 10% of trades on the Nasdaq market and New York Stock Exchange, far less than during the dotcom boom when it accounted for more than 30%.

The tie-up will create "significant value for shareholders by generating substantial cost synergies," said Ameritrade chief executive Joe Moglia. The deal is expected to put pressure on rival online broker ETrade Financial to find merger partners.