Listed online brokers IWL and E*Trade are investigating a possible $500 million merger that will challenge CommSec as the major player in the industry.IWL and E*Trade are the second and third largest players in the online broking industry, which is enjoying a particularly buoyant time as the Australian sharemarket reached the landmark 5,000 mark in trading today.IWL has strong Western Australian links, having acquired online trading pioneer Sanford Securities in April 2003, and more recently the Hartley Poynton spun-off JDV in October last year.Both Sanford and JDV are fully owned subsidiaries of IWL and have their operations headquartered in Perth. JDV provide online equities platforms and services to Perth wealth management firm, Entrust Private Wealth Management, BT Financial Group and Suncorp Metway amongst other clients. While IWL has led the consolidation of online trading companies in Australia, CommSec, has also made acquisitions - in AOT Online and TD Waterhouse Australia.The online stockbroking industry has been one of the fastest-growing sectors in the financial services industry, with more and more retail investors prepared to bypass advice from a broker and trade online for a significantly cheaper commission rate.There was a record average of 142,000 trades a day last month.It has also proved to be very profitable for the major players. CommSec generated about $130 million in broking revenue from 5.8 million trades last year.A merger of IWL and E*Trade, who processed 1.2 million and 2 million trades respectively over the same period would see the merged entity close the gap on CommSec.The IWL figure will be further boosted this year from a full-year contribution from its JDV acquisition.IWL provides online broking services to customers of National Australia Bank and Westpac Banking Corporation, and E*Trade services customers of ANZ Banking Group.
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