The deal includes $225 million in cash and the issuance of approximately 28 million shares of TD Ameritrade common stock to thinkorswim shareholders. A stock buyback programme will be initiated to equal the shares issued in the acquisition.

Each share of thinkorswim will be exchanged for $3.34 in cash and 0.3980 of a TD Ameritrade stock - a 46% premium on the 30-day average exchange ratio.

Chicago-based thinkorswim made $87 million in pre-tax profit from revenues of $380 million for the 12 months ended 30 September. It has around 87,000 funded retail brokerage accounts, each placing approximately 176 trades per year, and more than $3 billion in client assets.

TD Ameritrade says it is already the industry leader in the number of equity trades placed each day and the acquisition of thinkorswim will make it the number one for options as well.

The buyer says thinkorswim will help it introduce new functionality for customers, including advanced options trading, futures, foreign exchange and portfolio margining.

In addition, thinkorswim's Investools investor education offering will provide TD Ameritrade with a new acquisition channel and benefit its nearly seven million retail account holders.

Thinkorswim's chairman and chief executive officer Lee Barba will have an "active role" in the transition while the company's founders Tom Sosnoff and Scott Sheridan will join TD Ameritrade.

Fred Tomczyk, president and chief executive officer, TD Ameritrade, says: "This transaction is directly aligned with our growth strategy, creating scale for the trading side of our business and, more importantly, advancing our trading strategy by several years"

TD Ameritrade says it expects the deal to close within six months, subject to approval from thinkorswim shareholders and regulators. The acquisition is expected to be accretive by between three per cent and seven per cent of fiscal 2010 GAAP earnings.

Merrill Lynch is advising TD Ameritrade on the deal with Paragon Capital Partners serving as advisor to thinkorswim.

TD Ameritrade shares were down over six per cent, to $12.68 in morning trading on the Nasdaq. Thinkorswim stock was up over 40% to $7.99.