Is TD Ameritrade setting the stage to buy E-Trade?

E-Trade Financial Corp. shares surged late Wednesday after media reports fed speculation that rival online broker TD Ameritrade Holding Corp. could make a bid for the company.

Shares of New York-based E-Trade jumped 9 percent to their highest close in a month, tacking on 14 cents to $1.69. Shares had been only modestly higher before reports surfaced that TD Ameritrade CEO Fred Tomczyk said at a conference he would consider a deal with E-Trade.

In after hours trading, E-Trade shares added another 2 cents to $1.71, while TD Ameritrade shares slipped 17 cents to $21.09.

Kim Hillyer, a spokesperson for TD Ameritrade, confirmed that Tomczyk said he would entertain a deal with E-Trade when asked about that company specifically during a conference, but that his response reflected the company’s general view toward M&A.

“If there is an opportunity in the marketplace, whether it would be with that firm or another firm, we would consider it if it made sense strategically,” Hillyer said.

TD Ameritrade has made 10 acquisitions since 2001. The most recent deal closed in June, when the Omaha, Neb.-based firm bought thinkorswim Group Inc. for $606 million.

A representative of E-Trade was not immediately available for comment.

Earlier Wednesday, E-Trade reported lackluster trading activity for October, but indicated that activity has improved this year overall.

E-Trade said daily trading volume fell 22 percent last month compared with October 2008. Volume was down 5 percent from September.

The company said daily average revenue trades fell to 194,662, compared with 248,817 in October 2008 and 205,526 in September 2009.

But daily average revenue trades were up 9 percent through the first 10 months of this year compared with the same period a year earlier.

Total customer assets rose nearly 20 percent to $142.9 billion last month compared with the same month a year ago, reflecting the sharp rebound stock prices have recorded since bottoming out in March. But customer assets last month were down nearly 4 percent from September.

E-Trade had more than 2.7 million total brokerage accounts at the end of October, up 6 percent from a year ago, and essentially flat compared with September.

Total accounts, which include stock plan and banking accounts as well as brokerage accounts, stood at more than 4.5 million at the end of October, up 2.2 percent from a year ago, and flat from September.