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What’s Next for the Brokerage Industry?

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IBKR and ETFC’s DARTs: A comparison

In the second quarter, brokerages are expected to witness a sequential decline in their daily average revenue trades (or DARTs). In the first quarter, the primary drivers for the higher DARTs were volatile markets coupled with interest rate expectations. However, the earnings season and the stronger economy reduced the volatility in the equity markets in the second quarter.

In May, the markets were volatile but didn’t substantially contribute to the brokerages’ second-quarter revenues. Interactive Brokers Group’s (IBKR) May DARTs of 780,000 were lower than its April DARTs of 812,000.

E*TRADE Financial Corporation (ETFC) saw a marginal sequential rise of 1.0% in its May DARTs. A primary reason for this increase in DARTs could be increased volatility.

Total client assets

Charles Schwab Corporation’s (SCHW) total client assets depend on the market’s performance. So, a solid performance by the broader markets (SPY) in the second quarter could improve the client assets of the company sequentially. 

Investors seem to prefer discount brokerages over traditional brokerages primarily due to lower fees. However, if a brokerage company reduces its commission rates and another brokerage company adopted the same measure, it could fuel price wars and impact the financials of the overall industry.

Clients of discount brokers have become accustomed to using digital trading tools. During the company’s fiscal second-quarter earnings release on April 23, TD Ameritrade’s (AMTD) CEO, Tim Hockey, reflected positive views regarding this trend. According to the company, mobile apps are attracting its clients’ attention.

On June 16, the following brokerages recorded the following market capitalization numbers:

  • Charles Schwab: $75.6 billion
  • TD Ameritrade: $33.7 billion
  • Interactive Brokers Group: $28.6 billion

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