They would be remiss to let the competition move first, reducing the value of the stragglers. There's mounting evidence that smaller online brokers should start thinking seriously about their options. The Nasdaq's slide this year is putting the squeeze on trading commissions industrywide. More importantly, the ranks of online brokers have swelled to more than 150 players. This has put a lid on price increases, while forcing firms to maintain high marketing expenses so they can build their brands and stand out from the crowd.
Few competitors have the resources to compete with that kind of spending.
The bulge in the number of online brokers will only put increasing pressure on smaller players. The trend continued in the third quarter, and there's no reason to think it will change. For big financial-services firms that don't provide online brokerage, now is the time to consider a deal. That's a steep price. But with brokerage stocks at sustained low levels, there's a good chance some of the world's giant financial-services firms that are weak in retail brokerage could pull off similar deals that would instantly catapult them into the big leagues of the retail investment world.