Financial services exchange traded funds are joining the broader market to the downside Wednesday, but there could be a potential catalyst looming for those ETFs focused on broker-dealers stocks.
Long rumored to be a takeover candidate, E*Trade Financial (NasdaqGM: ETFC) is back in focus a potential target. That could be impactful for broker-dealers ETFs that hold both shares of E*Trade and its potential suitors.
If rising rates do reignite E*Trade takeover speculation, the company could become a target for rivals such as Charles Schwab (NYSE: SCHW) and TD Ameritrade (NasdaqGM: AMTD), according to 24/7 Wall Street.
The iShares US Broker-Dealers ETF (NYSEArca: IAI), which tracks U.S. investment banks, discount brokerages and stock exchanges. The $299.4 million ETF features E*Trade as its seventh-largest holding at a weight of 5.1%. Schwab and TD Ameritrade are IAI’s third- and sixth-largest holdings, respectively, combining for almost 13% of the ETF’s weight. [Broker-Dealers Lift This ETF]
Dow component Goldman Sachs (NYSE: GS), the largest U.S. investment bank, and Morgan Stanley, are IAI’s top two holdings. Those Wall Street giants combine for over 18% of IAI’s weight.