Investment bank Morgan Stanley is acquiring online brokerage E*Trade Financial Corp. in an all stock deal for $13 billion. While the deal will not have an immediate impact on cryptocurrencies, it may generate tailwinds strong enough to hasten the company’s move into crypto trading in the future.
A Convergence and Consolidation
The acquisition announced yesterday is a bold move by Morgan Stanley, considered among the most vulnerable of the big four banks during last decade’s financial crisis, because it could radically transform the organization’s average customer profile. It mainly caters to wealthy individuals and institutions currently but the E*Trade acquisition brings 5.6 million customers, consisting of average investors to employees with stock options, into its fold.
Reports suggest that the biggest attraction for Morgan Stanley might be E*Trade’s corporate stock plan servicing business. The division is responsible for managing employee stock option plans. Solium Capital, another company involved in the same business, was acquired by Morgan Stanley last year.
The acquisition also continues an ongoing convergence and consolidation of providers within the financial services industry. According to the New York Times, the deal represents “elite bastions of corporate finance” changing their business model to cater to traders and small investors unable to buy into high return investment vehicles like hedge funds.
Morgan Stanley’s acquisition is the second such deal announced in less than six months. San Francisco-based Charles Schwab Inc. announced purchase of E*Trade competitor TD Ameritrade Inc. in November last year. Both brokerages make money off trading commission fees but their business models have suffered due to the zero commission trading fees that have become popular within the trading industry.
What Does the Deal Mean for Crypto?
In the near term, the deal might not mean much. It will not be accretive to Morgan Stanley’s bottom line until 2023 and, given the volatility and regulatory state of crypto markets today, it is unlikely that Morgan Stanley will push the asset class to retail investors and traders anytime soon. In the long term, however, things might change. TD Ameritrade and E*Trade launched crypto trading and education services recently. But those divisions are an insignificant part of their business. Morgan Stanley itself was interested in introducing a bitcoin swap trading facility for its clients in 2018.
While there has been no word on a possible launch date since, the bank is reportedly making aggressive moves in becoming tech savvy. It automated work for its 15,000 financial advisors through the Wealth Desk platform and hosted a Fintech conference at the end of last year. Some of that enthusiasm might rub off on its crypto initiatives in the future.