Interactive Brokers Group, Inc. (NASDAQ: IBKR) has agreed to purchase a self-directed retail brokerage segment from online custodian Folio Investing in a push to expand its reach to Main Street investors. The deal, which is not subject to regulatory approval, is expected to close in January 2021.
Interactive Brokers CEO, Milan Galik said the planned acquisition would help scale up investment products available to Folio clients, particularly in non-commission trading and fractional shares space.
Both Interactive Brokers and Folio Investments declined to comment on the price of the acquisition, but companies are typically required to disclose the price paid only if the acquisition deal is worth more than $500 million.
While terms of the purchase were not disclosed, the addition of Folio Investing’s retail business will expand IBKR’s books by nearly 70,000 client accounts and $3 billion in client equity, it stated.
Interactive Brokers reported 2.29 million daily average revenue trades, or DARTS, and 1.037 million active accounts in November 2020.
The news comes barely two months after Goldman Sachs acquired Folio Financial for an undisclosed amount of money. The global bank will retain Folio’s wealth management and custodial division business, which has $11 billion in assets under custody for registered investment advisers.
In a letter informing customers of the sale on Friday, Folio said: “At this time, we’ve decided to focus on our core business of supporting investment advisors with technology, custodial, brokerage and other services. This means we will no longer provide our services to self-directed investors. Interactive Brokers will provide you with features and products not currently available through Folio, such as the ability to trade options and access international securities markets. Like us, Interactive Brokers is a member of FINRA and SIPC.”
Interactive Brokers’ latest takeover comes amid a swirl of M&A within the industry. Speculation surrounding a possible deal started earlier this year when IBKR founder, Thomas Peterffy said his company had considered buying E-trade but decided to pass because it was a risky bet.
Morgan Stanley acquired E-Trade for $13 billion, and Charles Schwab bought rival TD Ameritrade in an all-stock $26 billion deal, the latest in a consolidation wave for the brokerage industry that collectively lowered trading fees to zero.
“Interactive Brokers has long been recognized for its advanced technology, superior pricing, and breadth of product. With the transition to our firm, Folio Investments’ former clients now will be able to invest in stocks, options, futures, currencies, bonds and funds worldwide from a single, integrated account,” said Galik.