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Interactive Brokers unlikely to pursue M&A, including E*TRADE deal

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Interactive Brokers unlikely to pursue M&A, including E*TRADE deal

Interactive Brokers Group Inc.'s founding executive does not foresee the online brokerage pursuing a deal to acquire rival E*TRADE Financial Corp.

Amid a swirl of M&A speculation within the industry, Thomas Peterffy, Interactive Brokers' founder and chairman, said his company is used to growing organically and is unlikely to try and "digest another business" right now. That includes E*TRADE.

"Culturally, we're used to growing our own business," Peterffy, who recently stepped down as Interactive Brokers' CEO, said Oct. 15 during a third-quarter earnings conference call. "Right now, it would be especially complicated because it's very hard to tell what these different operations will look like."

The growing consensus among analysts that E*TRADE could be up for sale comes on the heels of a price war that has disrupted a key revenue source for many online brokers.

Interactive Brokers somewhat indirectly kicked off the round of price cuts Sept. 26 when it unveiled it was creating a new offering known as IBKR Lite that would allow its users to trade U.S. exchange-listed stocks and exchange-traded funds for free. The model is not replacing Interactive Brokers' more sophisticated offering, IBKR Pro, but was designed to complement it.

A week later, Charles Schwab Corp. went one step further by completely eliminating commission fees for certain online trades. That was promptly followed by near-identical moves from E*TRADE, TD Ameritrade Holding Corp. and Fidelity Investments.

Now, with commission revenues out the window, E*TRADE has once again become the subject of a flurry of M&A rumors. An acquisition of E*TRADE would provide an existing online broker an opportunity to scale out its business even further. But Interactive Brokers will not likely be "actively looking at E*TRADE," Peterffy said.