E*Trade Shares Close at Session Low

TD Ameritrade's Tomczyk spoke Wednesday at a Reuters conference, answering questions about potential uses for the company's cash. He told attendees that an acquisition was the "best use" for the money, and said he'd be interested in doing a deal for E*Trade "under the right circumstances," Reuters said, a sentiment that's consistent with past company statements on the topic.

Late Wednesday, TD Ameritrade spokeswoman Kim Hillyer told TheStreet that Tomczyk's comments were "taken out of context" in subsequent reports that implied he said TD Ameritrade was specifically interested in acquiring E*Trade. E*Trade spokeswoman Pam Erickson said the company does not comment on rumors or speculation.

TD Ameritrade has long been viewed as a match to merge with E*Trade, to the point where two activist hedge funds -- S.A.C. Capital and Jana Partners -- attempted to get the pair to combine back in 2007, citing expectations for huge cost benefits from the deal. S.A.C. and Jana had bought a big stake in TD Ameritrade in hopes that it would merge with either E*Trade or rival Charles Schwab (SCHW).

As the financial crisis deepened, E*Trade's prior expansion efforts left it saddled with underwater home equity and other mortgage loans as well as a devalued securities portfolio, and these toxic assets, which the company is seeking to unwind, are viewed as the major impediment to a deal. Citadel Investments took a large stake in the struggling firm in late 2007, betting it would be able to stabilize itself. Also, this summer, E*Trade completed a recapitalization plan through debt swaps and an equity offering at the behest of regulators.

Another driver for the ongoing merger speculation is E*Trade's announcement in September that CEO Don Layton would be stepping down at the end of the year when his contract expires. The company has yet to name a successor, and has provided little clarity on the progress of the search to this point.

--Written by Laurie Kulikowski in New York.

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