Online Brokerage Acquisitions Make Room For TradeKing? (AMTD, ET)

Includes: AMTD, ETFC
by: David Jackson

Note this comment from E*Trade CEO Mitchell Caplan, on his conference call last night:

In 2006, we will focus on executing our integration plan, including Harrisdirect and BrownCo while further seeking consolidation opportunities that create value for customers and shareholders.

So we haven't seen the end of consolidation in the online brokerage market. Interestingly, as the online brokers consolidate and raise prices, this opens an opportunity for new players to come in at attractive price points. Note this remark by a contributor to ETF Investor, discussing the cheapest way to trade ETFs:

But now there’s a new kid on the block that seems to offer the best of both worlds. TradeKing, which launched recently, is an online brokerage with $4.95 commissions on pretty much all trades, both equities and options.

Question: As the largest online brokerages focus on asset gathering and generating cash from assets rather than trading commissions, I wonder how TradeKing will generate profits. Are $4.95 commissions enough?