Morningstar Analyst Sees Charles Schwab-FXCM Buyout As 'Revenue Diversifying,' But 'Counter To Charles Schwab Image'

Speaking to Benzinga, Morningstar Analyst Michael Wong said that a Charles Schwab Corp SCHW buyout of FXCM Inc FXCM would be “revenue diversifying,” but quickly added that it would be a bit outside of Charles Schwab’s character.

“Charles Schwab recently has been focused primarily on delving out a wealth management-type business and has not really been as interested in expanding internationally, nor has focused as much on the active trade,” he said.

Wong explained that retail forex trading is much more focused outside the United States in places like Europe and Asia, in addition to being more focused on people willing to take highly leveraged positions (and those who generally trade more frequently).

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Wong pointed out that TD Ameritrade Holding Corp. AMTD had even come out and said that it wasn’t interested in acquiring a forex broker.

“With Charles Schwab trying to make that further push into wealth management-type strategies, going further into active trader, highly-leveraged international operations just doesn’t fit in with the image they’re trying to project at the moment,” Wong said.

He concluded that the acquisition would be business diversifying, but is counter to the image portrayal of Charles Schwab.

Charles Schwab traded roughly 0.90 percent lower in Friday’s session, while FXCM was down 22.26 percent.

Shares of TD Ameritrade were down 0.18 percent.

Brianna Valleskey contributed to this report.