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Interesting reading:

E-Trade and TD Ameritrade reportedly talk merger

By MarketWatch
Last Update: 7:42 AM ET Aug 22, 2007(MarketWatch) - TD Ameritrade and E-Trade are discussing a merger, which would create a dominant player in the online-brokerage industry and possibly prompt another industry shakeout, a media report said on Wednesday.

The Wall Street Journal cited people familiar with the matter as saying that E-Trade of New York, and the TD Ameritrade affiliate of Toronto-Dominion Bank were discussing a combination.

Such a move could produce a consolidation like the one that occurred after the dot-com bubble burst in spring 2000, the paper reported.

E-Trade rose 6% and TD Ameritrade climbed 8% in pre-open trade.
E-Trade didn't confirm the talks but didn't reject the speculation, either.

"We do not comment on specific market speculation or rumor. However, the management team has consistently stated that there is tremendous value in consolidation of companies with aligned business strategies and operational synergies," a spokeswoman said in an e-mailed message.

Ameritrade didn't immediately return a message.

At the end of June, E-Trade had 4.7 million brokerage and banking accounts, TD Ameritrade had 6.3 million and Charles Schwab, the online-industry leader, had 6.9 million, the paper reported.

TD Ameritrade and E-Trade have talked merger several times in previous years. This time, however, two hedge funds that hold TD Ameritrade shares -- Jana Partners and SAC Capital -- have publicly called on the companies to talk, the WSJ reported.

There are still plenty of hurdles to a successful deal.

UBS analyst Michael Carrier -- who downgraded E-Trade to neutral from buy minutes before the Journal story was published -- said TD Ameritrade would not be "thrilled" to take on E-Trade's $28 billion mortgage or its $3 billion asset-backed securities portfolios.

He also said the two firms have different strategies, crowded boards and big, demanding shareholders.