What to look for in Q2 2018
After lower volatility in April, the markets were again volatile in May, which boosted brokerages’ (VFH) daily average revenue trades (or DARTs). Overall, volatility was lower sequentially in the second quarter, hinting that brokerages’ trading revenues might fall. The primary factors that reduced volatility in the second quarter were corporate earnings, improvement in employment, and settling geopolitical tensions.
Brokerages will likely benefit in 2018 from interest income. The Federal Reserve indicated at its June meeting that we could see a total of four interest rate hikes this year. The macro variables are supporting the US economy, and the jobs report indicated that the unemployment levels are low. The Federal Reserve is optimistic about the US economy.
E*TRADE Financial’s May numbers
On June 14, E*TRADE Financial (ETFC) reported its May numbers. The company saw DARTs of 253,649 in May, which reflects a rise of 1% month-over-month and 20% on a YoY basis. Of the total DARTs in May, 34% were derivatives DARTs. At the end of May, the company had around 3.9 million brokerage accounts, a 1% rise month-over-month and a 9% rise year-over-year.
E*TRADE’s net new customer assets amounted to $1.5 billion at the end of May. $1.4 billion of this was net new brokerage assets and $0.1 billion was net new banking assets. Interactive Brokers Group (IBKR), a competitor, reported DARTs of 780,000 in May. E*TRADE Financial, Interactive Brokers, TD Ameritrade Holding (AMTD), and Charles Schwab (SCHW) form 0.39% of the Vanguard Total Stock Market ETF (VTI).