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TD Ameritrade's $4 billion deal to buy Scottrade Financial Services makes sense for the discount brokerage, but such a deal wouldn't make sense for Charles Schwab, its president and CEO told CNBC on Tuesday.
"Their business is so much more transactional-oriented than ours. There's a commoditization going on in pricing of transactions. The way you combat commoditization is often via scale," Walt Bettinger said in an interview with "Power Lunch."
On Monday, TD Ameritrade said it would end up paying $2.7 billion for Scottrade's brokerage business after the sale of Scottrade Bank to Toronto-Dominion Bank's U.S. banking unit for $1.3 billion. Toronto-Dominion owns 42 percent of TD Ameritrade.
The deal combines two of the biggest U.S. discount brokerages. It comes at a time when the industry is facing weak trading volumes and slow revenue growth as wealth managers cut fees amid intense competition.
Bettinger said Schwab has diversified its business model so that it only has a modest amount of revenue tied to transactions.
"Transactions for us are less than 10 percent of our revenue. We don't really think that's where the puck is going. So it's something that we looked at but ultimately decided to take a pass."
— Reuters contributed to this story.