Thursday, September 21, 2006

Interesting deal in brokerage land

An interesting deal in the land of options was announced a few days ago. The deal, which paired options brokerage compay thinkorswim with INVESTools was sizable ($340 million). INVESTools is buying thinkorswim at a time when equity and index options are hotter than ever.

The interesting aspect of this deal is the underlying businesses of each company. INVESTools has traditionally been an educational company, providing insight and information on options trading for investors. The idea was that users would then get directed to options trading platforms such as optionsXpress and INVESTools would get some commission for the business they sent there. Thinkorswim, on the other hand, is purely an online options brokerage entity, which means that INVESTools is essentially entering unchartered territory relative to its old business model.

Vertical mergers seem less common in the financial services space lately, but prospects of this transaction could be quite bright. Equity options volume is on a tear, thinkorswim has been growing its account base at record paces and analysts expect the industry's volume to continue to rise rapidly.


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