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Why TD Ameritrade Could See Higher Daily Trades in Fiscal 3Q16

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Jul. 12 2016, Updated 11:06 a.m. ET

Daily trades

TD Ameritrade (AMTD) reported an average of 509,000 daily trades (or DAT) in fiscal 2Q16, a rise of 7% year-over-year (or YoY). In April and May 2016, its average trades fell to 457,000, but they were higher than the 434,000 it achieved in the prior year, mainly due to higher volatility and trades contributed from new client assets.

Derivatives accounted for 44% of TD’s average trades per day, compared to 42% in the same period in fiscal 2015. Derivative trades rose by 2% YoY. Trading activity through mobile platforms contributed a record 18% of total trades.

Trading in futures benefited from volatility in commodities. The company saw higher trades on increased volatility across asset classes, including equities, foreign exchange, and commodities. The trend was strong across the industry as wild swings occurred during the beginning of 2016.

Here’s how a few of TD Ameritrade’s peers in the brokerage industry have fared in terms of revenue in the last 12 months:

  • Interactive Brokers Group (IBKR): $1.1 billion
  • E*TRADE (ETFC): $1.8 billion
  • Charles Schwab (SCHW): $6.2 billion

Together, these companies form 1.3% of the Financial Select Sector SPDR ETF (XLF).

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Commissions are falling

TD Ameritrade’s average commission per trade fell marginally in fiscal 2Q16. The trend is expected to continue, with marginal falls in fiscal 3Q16. In 2Q16, the company earned an average commission per trade of $11.60 compared to $11.90 in the previous quarter and $12.23 in the prior year’s quarter. Commissions across the industry are falling due to increased competition and technology across platforms. This trend is expected to continue over the next few quarters.

The company’s commissions and transaction fees in fiscal 2Q16 were $360 million. This compares to $328 million in fiscal 1Q16 and $350 million in fiscal 2Q15.

Higher trading activity in the overall market led to a rise in TD’s revenue. US markets witnessed higher volatility in 2Q16, which resulted in higher trades.

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