Toronto-Dominion Bank (TD.TO) and TD Ameritrade (AMTD.O) are buying Scottrade Financial Services for US$4 billion in a deal that would combine two of the biggest U.S. discount brokerages, the companies said on Monday.

TD Ameritrade, the largest U.S. discount brokerage by trade executions, said it would pay US$2.7 billion for Scottrade's brokerage business. Toronto-Dominion Bank, TD's largest shareholder, is acquiring Scottrade Bank for US$1.3 billion.

Discount brokerages are facing weak trading volumes and slow revenue growth as wealth managers cut fees amid intense competition, sparking consolidation within the industry. E*Trade Financial Corp (ETFC.O), another discount broker, said in July that it would buy online brokerage OptionsHouse for US$725 million.

The US$2.7 billion comprises US$1 billion in new common TD Ameritrade shares and US$1.7 billion in cash.

Rodger Riney, the founder, chief executive officer and controlling shareholder of St. Louis-based Scottrade, will join TD Ameritrade's board after the deal closes, the companies said. Riney said last year he was being treated for a form of blood cancer.

TD Ameritrade, which is 42 per cent owned by Toronto Dominion Bank, said it expected the deal to bring about US$450 million in annual savings and more than US$300 million in "additional longer-term opportunities."

Omaha, Nebraska-based TD Ameritrade, which also reported a higher-than-expected quarterly profit on Monday, provides services to about 6 million client accounts with combined assets of more than US$600 billion.

The companies expect the deal to close by Sept. 30. Barclays Capital Inc is financial adviser to TD Ameritrade, while Wachtell, Lipton, Rosen & Katz is legal adviser. Goldman Sachs & Co (GS.N) is advising Scottrade, with Sullivan & Cromwell acting as legal adviser.

TD Ameritrade's shares, which had risen 6.8 per cent in the year, were nearly unchanged in premarket trading.