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Charles Schwab Corp, the largest discount broker in the U.S. financial world, is in talks to buy rival TD Ameritrade, CNBC reported on Thursday, as profits in the industry come under pressure from a shift to zero commission.

CNBC did not provide any financial detail on the deal, but Fox Business pegged the value at $26 billion, citing sources. At that price, it would be a premium of roughly 18% to Ameritrade’s market capitalization.

Shares of TD Ameritrade surged more than 26% to $52.54 in trading before the bell. Charles Schwab shares jumped 15% to $51.79. (https://cnb.cx/2qBS3bJ)

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Neither companies responded to Reuters’ requests for comment.

Pressure on the discount broker business model has been rising in recent years, as the increased use of technology required huge spends on platforms but also undermined the fees charged to administer equity trades.

With disruptors such as Menlo Park, California-based Robinhood Markets Inc rapidly gaining market share by eliminating stock trading commissions, this pushed the large brokers to do the same: Schwab was first last month, covering online trading of stocks, ETFs and options, with others such as Fidelity Investments, E*Trade Financial Corp <ETFC.O> and TD Ameritrade also acting.

Earning less cash from trading has placed increased focus on other areas such firms can make money, in particular managing the pool of customer assets which these firms control.

Schwab earned about half of its more than $10 billion in revenue in 2018 from interest earned.

The combined company would have assets of around $5 trillion, according to Reuters calculations.

The three interest rate cuts seen this year make income from investing customer balances less profitable, and negative interest rates would further impact this.

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“This is largely about scale,” Argus Research analyst Stephen Biggar said. “I believe a merger could present substantial cost synergies.”

ANTITRUST

While a potential deal could give Schwab an edge in the price war, it remains to be seen whether creating such a dominant player within the discount broker world would avoid scrutiny from antitrust regulators.

Under the Trump administration, oversight bodies have been more willing to approve big financial mergers: this week, the U.S. Federal Reserve cleared BB&T Corp and SunTrust Banks Inc to combine, in the largest bank merger since the global financial crisis.

However, while there are still thousands of banks in the United States, the discount broker space is much more consolidated: for example, the combined company would have approximately 65% to 70% of RIA custody assets, according to a research note from KBW.

The timing of the transaction, so soon after the elimination of online trading fees by Schwab, could also raise questions about predatory pricing moves.

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“Because Schwab just cut commissions to zero, then bid for their most hindered competitor, that could lead to legal challenges and will likely draw anti-competitive scrutiny,” UBS analysts wrote in a research note.

The combined company is expected to be led by Schwab’s Chief Executive Officer Walt Bettinger, according to CNBC.

This would solve TD Ameritrade’s leadership quandary: CEO Tim Hockey is due to step down in February, and no replacement had been named.

The deal could also force E*Trade, the third largest discount broker, to look for possible acquisitions. Shares of E*Trade were down nearly 5% following the CNBC report.

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