(FORTUNE Magazine) – Last year, online broker E*Trade Financial made an unsuccessful run at TD Waterhouse. This spring it was Ameritrade that spurned E*Trade's offer. But that doesn't mean the story's over. Unless the stock market takes off--and nobody sees that happening any time soon--the industry seems ripe for consolidation.

Few dispute the need for online brokers to merge. Squeezed by lower volumes, e-brokers have engaged in a price war to gain market share and customers. That's why E*Trade earlier this month made a bid, valued at around $6.2 billion, for Ameritrade, which prompted its board to declare that it wasn't for sale.

If the two were to work out a deal, the combined company could create $650 million in cost cuts and new revenues, according to E*Trade. Some analysts think the deal still makes sense. "E*Trade and Ameritrade have similar customers and a similar business model," notes Matthew Snowling, an analyst at Friedman Billings Ramsey. "I think it's reasonable to expect that E*Trade will come back with [another] offer." E*Trade wouldn't comment on its plans.

Consolidation may make sense on paper, but getting the companies to marry is tough. The problem is that the three most likely merger candidates--Ameritrade, E*Trade, and TD Waterhouse, a unit of Toronto-Dominion Bank--are all roughly the same size and don't have a ton of extra cash to sweeten any deal pots, say analysts. That means those would be more of a merger of equals, which brings egos and control concerns into play.

The company in the catbird seat is Ameritrade, which has made seven acquisitions in the past four years and would like to do more. It has been rumored to be in talks with TD Waterhouse, though analysts say that's not a great fit because of Waterhouse's big branch network. Operating 140 branches would take a bite out of Ameritrade's 50% pretax profit margins. Ameritrade may make a run at a smaller player, like Harrisdirect or privately held Scottrade, say analysts.

The wild cards are industry giants Fidelity, a unit of FMR Corp., and Charles Schwab. Founder and CEO Chuck Schwab says he has no interest in doing a deal with another e-broker. Even if he wanted to, investors would probably trash Schwab's stock, given the company's internal challenges and its history of bungled dealmaking. That leaves Fidelity, which would love to grow its online brokerage unit faster, say analysts. Sums up David Trone, an analyst at Fox-Pitt Kelton: "Consolidation in this industry might require someone like Fidelity to step up, pay cash, and take one of the smaller players out." -- Julie Creswell