Talks to merge E*Trade and Toronto Dominion Bank's ( TD - Get Report) TD Waterhouse online brokerage unit ended after the two side failed to agree on terms.

The companies confirmed on Jan. 13 that they were discussing a combination that would have produced the second-largest discount brokerage behind Schwab ( SCH).

"Both companies agree that while there were potential benefits to concluding a transaction that merited serious discussion, they were unable to arrive at mutually agreeable terms," they said in a joint statement.

E*Trade was off marginally in thin premarket trading to $14.82, down 12 cents, or 0.8%.

Preliminary terms for the merger would have left Toronto-Dominion Bank with a 40% to 50% stake in the combined business, making it the biggest shareholder, according to published reports last week.