Web-Broker Shakeout? Hit the Pause Key
It's better to build than to buy.</br></br>That is the current mantra of online brokerage firms, whose ranks have ballooned in recent years and now number about 140. But with prices and activity on the Nasdaq Stock Market -- playground of online traders -- swooning since March, a shakeout among online brokers seems inevitable.</br></br>"This industry is absolutely ripe for consolidation," says Henry McVey, an analyst at Morgan Stanley Dean Witter. "You've got a glut of capacity out there."</br></br>Yes, yes. But not so fast.</br></br>What's holding things up is a little-known fact: It remains far cheaper for online brokers to acquire new accounts through massive ad spending than to gobble up smaller rivals.