Saturday, August 03, 2013

TradeKing, Gain Unite

The latest example of the consolidation among smaller online broker firms. More tools, lower prices for Gain traders.

Fort Lauderdale, Fla.–based online broker TradeKing, which snapped up rival Zecco late in 2012, last week bought Gain Securities, a subsidiary of Gain Capital Holdings . TradeKing’s CEO Don Montanaro says the takeover includes only Gain’s stocks, bonds, and options customer base, which was a small portion of the online firm’s total retail business, which focuses on foreign-exchange trading. The deal will close within 30-60 days, pending approval of the Financial Industry Regulatory Authority.

The exact details of the all-cash deal have not been announced, but Montanaro says that they affect “a few thousand customers with a few hundred million” dollars in assets. The specifics will be disclosed once the transaction has been completed and publicly held Gain (ticker: GCAP) files its quarterly reports. Gain shares rose about 20 cents, to $6.30, on the news.

TradeKing and Gain have gotten to know each other over the past year because TradeKing uses a Gain foreign-exchange application as part of its own trading platform. Gain Capital was the target of a $210 million takeover bid this past spring but fended it off by buying a competing online foreign-exchange broker. Montanaro says that Gain Capital’s CEO gave him a call to see if it was interested in this portion of the business.

Montanaro says that “TradeKing will be a great home for them. We charge less than Gain was charging, plus they’ll get a site with more tools and more education.” The new customers will also be able to use TradeKing’s mobile apps, which Gain does not offer. They will see their stock-transaction fees drop from $6.99 at Gain to $4.95 at TradeKing, which should soften the blow of making a brokerage transition. Since both firms use the same clearing firm (Apex), Montanaro says they’ll be able to keep their account numbers, as well.

Problems in online-brokerage mergers usually occur when clearing operations have to change. So if the Finra approval occurs as expected, the technology aspect of this takeover should progress without much trouble.

Montanaro says his firm is very willing to grow via acquisition, and figures there are quite a few candidates out there. “We care a lot about the client in this space, and we know we can bring them a great experience,” he says, adding, “I found that my team is really good at managing these mergers and acquisitions. We’ve shown we can execute on that and want more chances.”

Outside of the Big 5 in online brokerage— Charles Schwab (SCHW), Fidelity, E*Trade Financial (ETFC), TD Ameritrade (AMTD), and Scottrade—Montanaro expects continuing consolidation. “We’d like to be the driver of that,” he says.

OPTIONSXPRESS UNVEILED its Walk Limit order late last summer with the intention of making options spread orders easier to place while possibly saving traders money. According to the firm’s CEO, Joseph Vietri, client savings so far are running in the range of $1 million per month. (That’s for the entire firm, not each client.) There is no additional cost for a Walk Limit order, which automatically updates your order rather than relying on time-consuming manual shifts to try to get a good price.

This order was restricted when first launched, with the initial price defaulting to the midpoint between bid and ask; the price would gradually step toward National Best Bid or Offer every two seconds. In January, however, traders could set their own initial start price, and in May the ability was added to customize the time taken to step from one price to the next, ranging from two to 60 seconds.

Built on optionsXpress’ proprietary options order-routing technology, the Walk Limit functionality has been extended to all two-, three- and four-legged options strategies, and will be available for single-leg strategies starting in September. The Walk Limit technology will be extended to futures options orders, as well.

When the optionsXpress is absorbed into the Schwab platform, the Walk Limit order type will continue to be available. Vietri says, “We want you to get better fills and better outcomes, so we have happy clients who tell their friends, and bring in new clients.”

Published in Barron’s, July 29, 2013

Posted by twcarey on 08/03 at 01:53 AM
Published in Barron's • (0) CommentsPermalink