Toronto-Dominion Bank and Ameritrade Corp. are in "serious discussions" about a sale of TD Waterhouse USA. The talks were reported by the Toronto Globe and Mail.

Terms of a deal could be set between the two firms as early as next Wednesday (October 15) when TD's board has a scheduled strategy meeting. The deal will likely be a stock swap, according to sources cited by the paper.

If Ameritrade and TD Waterhouse do cut a deal, the paper reports that it is likely that TD Waterhouse executives will control the combined firms. Those terms would be a major change at Ameritrade, which has been tightly controlled by founder J. Joe Ricketts and is closely identified with its Omaha headquarters.

TD CEO Ed Clark and vice-chair Andrea Rosen have talking with three U.S. brokerage firms about a deal since last summer. The three firms are identified as Ameritrade, E*Trade Group and Charles Schwab Corp. Any of the three that acquire TD Waterhouse would become the largest discount broker.

Goldman Sachs is advising TD and Credit Suisse First Boston is thought to represent Ameritrade in the deal. There is now word on whether Schwab or E*Trade have retained bankers.

Meanwhile, Clark told the paper that TD Waterhouse remains undervalued in the market.

"Waterhouse's value isn't being reflected in our stock, and that's what leads people to say 'Well, maybe you have to get rid of the thing.' And I sit there and say, 'Well, no, you have to be a little patient here and eventually its underlying power will come through,'" he told the paper.  

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