Morgan Stanley is buying online brokerage E-Trade for about $13 billion.
Discount brokers like E-Trade have engaged in a vicious fight for customers since late last year, when Charles Schwab Corp. announced that it would eliminate the fees it charges customers for trades.
Weeks later, Charles Schwab and TD Ameritrade Holding Corp. said they would merge, creating a colossus of a rival for E-Trade.
In the all-stock deal announced Thursday, E-Trade shareholders will receive 1.0432 Morgan Stanley shares for each share they own.
E-Trade Financial Corp. has over 5.2 million client accounts with over $360 billion of retail client assets, adding to Morgan Stanley's existing 3 million client relationships and $2.7 trillion of client assets.
E-Trade's U.S. stock plan business will be combined with Shareworks by Morgan Stanley, a provider of public stock plan administration and private cap table management solutions.
"E-Trade represents an extraordinary growth opportunity for our wealth management business and a leap forward in our wealth management strategy. The combination adds an iconic brand in the direct-to-consumer channel to our leading advisor-driven model, while also creating a premier workplace wealth provider for corporations and their employees," Morgan Stanley Chairman and CEO James Gorman said in a prepared statement.
E-Trade CEO Mike Pizzi will continue to run that business.
The deal, which is anticipated to generate $400 million in cost savings, is expected to close in the fourth quarter. It still needs approval from E-Trade shareholders.
Shares of Morgan Stanley fell 3.7% before the market open, while E-Trade's stock surged 24.1%.