Squeezed Out On Datek, E*Trade Picks Up Tradescape

E*Trade (ET), an also-ran in the bidding war for Datek, said it will exchange stock worth $100 million for online brokerage Tradescape, improving its product offerings to high-volume, high-speed traders.

E*Trade said it will exchange up to an additional $180 million in stock if various performance goals are met. The company also agreed to acquire technology uses in its Power E*Trade Pro product for $5 million in stock from A.B. Watley (ABWGE).

E*Trade said the Tradescape acquisition will give it an additional 100,000 trades per day, bringing its overall transactions per day to more than 200,000, as well as access to a highly touted trading technology that is known for its speed. The acquisition doesn't include MarketXT, an electronic communication network that was owned by Tradescape.

E*Trade was assumed to be on the prowl for acquisitions after losing out on Datek to rival Ameritrade (AMTD), which agreed to buy the online brokerage last weekend for $1.3 billion. The major online trading players, which also number Schwab(SCH), have been trying to make up for their dismal volume numbers by buying accounts hand over fist in the last several months.

E*Trade expects the acquisition to be modestly accretive to 2002 earnings although it left its guidance unchanged, and to improve 2003 earnings by 10%. It expects to close the transaction in the third quarter.

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