The Charles Schwab Corporation
) is preparing to pull down the shutters of its brokersXpress unit,
a wing of optionsXpress Holdings, Inc within the next couple of
months. This was reported by
on Wednesday. brokersXpress' inability to fit in the strategic
setting may have prompted Schwab to opt for such an action.
Schwab acquired optionsXpress, a retail online brokerage company
focusing mainly on equity options and future acquisitions, in
September last year for a whopping $1 billion. Schwab's main
purpose behind this acquisition was to enhance its equity-business
and introduce options and futures trading to its customers.
Gradually, it was getting difficult to integrate brokersXpress
as it failed to meet Schwab's core business demands. Hence, Schwab
decided to close down the unit.
Upon closure of brokersXpress, most of its employees would be
absorbed either in optionsXpress or Schwab advisory services that
operates with 7,000 independent registered investment advisers
(RIAs). Schwab acts as a custodian to all these RIAs. A 90-day
closure notice will also be served to all the concerned
representatives and investment advisers.
It may be pointed out that optionsXpress has recently come under
the lens of the Securities and Exchange Commission (SEC), which has
accused it of fraudulent behavior. However, Schwab's spokesperson
has denied any connection of it with the brokersXpress closure
Last month, SEC charged optionsXpress for repeatedly indulging
in deceptive short-sale transactions claiming violation of
Regulation SHO of the Exchange Act. This act requires brokers to
complete customers' short sale transaction by buying and delivering
the stock within 3 days.
Instead of adhering to this rule, optionsXpress sold the call
options simultaneously and bought shares, generating apparent
sales. The purchased shares were resold without getting delivered
to the actual buyer.
Similarly, optionsXpress's trading arm, OX Trading LLC, was
accused of continuing with its trading operations even after being
de-listed from the Chicago Board Options Exchange (CBOE) and
deregistered with the SEC, apparently to avoid an audit.
With the closure of an unproductive unit, Schwab can concentrate
more on its core business. The company's image will remain intact
as there has been no retrenchment of employees during the shut
Currently, Schwab retains a Zacks #2 Rank, which translates into
a short-term Buy rating. One of its peers,
TD Ameritrade Holding Corporation
) retains a Zacks #3 Rank (short term Hold rating).
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