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Shares of Charles Schwab jump after sources say DOJ approves deal for TD Ameritrade

Online broker Charles Schwab received antitrust approval from the Justice Department for its acquisition of TD Ameritrade, sources told CNBC’s David Faber on Thursday.

Shares of Schwab gained 5.5% and TD Ameritrade jumped 9%. 

Schwab announced last November it would buy rival broker TD Ameritrade in the all-stock deal valued at $26 billion. The merging of the two biggest publicly traded discount brokers will create a mammoth with more than $5 trillion in client assets, $3.8 trillion from Schwab and $1.3 trillion from TD Ameritrade.

The acquisition calls for 1.0837 Schwab shares for each shares of TD Ameritrade, sources said. The companies expect the deal to close in the second half of 2020. 

The deal raised concerns about Schwab’s dominance in the registered investment advisors space, but the DOJ did not see any violation, sources told Faber. The new company will hold over a third of the registered investment advisor custody market, JMP Securities estimates.

While some Wall Street analysts are worried the consolidation of two of the biggest players could flag antitrust issues, the company will capture only about 11% of client assets in the retail financial services market, Schwab said at the time the deal was announced.

The news was first reported in a tweet from Faber on Thursday morning. 

Consolidation in the brokerage industry was expected, given the massive disruption that has taken place, with all the major brokers dropping commission fees at the end of last year. Schwab was the first major player to make the move, eliminating commissions last October. 

The big online brokers saw new accounts soar in the first quarter, when stocks experienced the fastest bear market and the worst first quarter in history.

Charles Schwab CEO Walt Bettinger said in an earnings release that the broker saw “monumental volumes” of trading from the 609,000 new broker accounts added in the first quarter, with over 280,000 in March alone. TD Ameritrade said last month that retail clients opened a record 608,000 new funded accounts in the first quarter, with more than two-thirds of those opened in March.

The broker industry’s next approval is likely to be Morgan Stanley’s acquisition of E-trade, which isn’t expected to flag any antitrust issues, analysts told CNBC. 

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