Here's Why Siebert Financial Is Soaring Today

MarketsMotley Fool

What happened

Siebert Financial Corp. (NASDAQ: SIEB), the holding company that offers discount brokerage services through its subsidiary Muriel Siebert & Co., signed a letter of intent with Overstock.com (NASDAQ: OSTK) to offer discount brokerage services through a portal on Overstock's website.

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Overstock said that the new service is expected to launch in the first quarter of 2018, and will offer $2.99 stock trades to all customers and special $1.99 commissions to its Club O loyalty members.

The market seems to like the news. Siebert Financial soared by as much as 42% on Monday and was up by 26% at 3 p.m. EST.

Now what

Overstock is a widely trusted brand name when it comes to all sorts of discount-oriented shopping, and has been trying to expand its reach. Most recently, Overstock has gotten into the automotive business with its "Cars by Overstock" platform. This is a logical addition to Overstock's platform to leverage its brand name into the discount brokerage business in partnership with a well-established firm.

So what

Discount brokers and other financial products such as mutual funds and ETFs have been in a price-cutting war for some time. For example, TD Ameritrade recently chopped its standard commission from $9.99 to $6.99, and other major players in the industry have done the same.

Even so, the Siebert-Overstock platform's commission structure would undercut the vast majority of the financial services industry, and could give the companies a major competitive advantage while trying to get the new platform off the ground.

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Matthew Frankel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.