Can Increased Volatility Drive Daily Trades for TD Ameritrade?
TD Ameritrade Is Seeing Higher Trades: Can It Continue?
Daily trades
TD Ameritrade Holding (AMTD) reported an average of 438,000 daily trades in the December quarter, up 6.6% on a year-over-year basis. In January 2016, daily average trades rose substantially to 579,000 on higher volatility. For the March quarter, daily trades are expected to be 7%–9% higher on increased volatility driven by equities and commodities.
Derivatives accounted for 44% of the average trades per day compared to 41% in the prior year’s quarter. Derivative trades rose by 3% on a year-over-year basis. Trading activity through the mobile platform contributed a record 18% of the total trades. Trading in futures benefited from volatility in commodities. Traded futures contracts rose by 30% from the March quarter of last year.
Below are a few of TD Ameritrade’s peers in the brokerage industry and how they’ve fared in terms of revenues in the last 12 months:
Interactive Brokers Group (IBKR): $1.1 billion
E*TRADE Financial (ETFC): $1.8 billion
Charles Schwab (SCHW): $6.2 billion
Together, these companies form 1.3% of the Financial Select Sector SPDR ETF (XLF).
Average commissions
TD Ameritrade’s average commission per trade rose marginally in the December quarter. The company earned an average commission per trade of $11.90 compared to $11.89 in the previous quarter and $12.45 in the prior year’s quarter. In 2016, commissions are expected to rise marginally due to an increase in competition from existing as well as technology-backed players.
The company’s commissions and transaction fees in the December quarter were $328 million. This compares to $364 million in the prior quarter and $359 million in the first quarter of 2015. Less trading activity in the overall Market led to a fall in revenues. The US Markets witnessed subdued volatility in the fourth quarter of 2015 resulting in lower trades. However, highly fluctuating commodity prices, concerns about a slowing China in 2016, and speculations on the interest rate hike could drive volatility higher and lead to higher trades for brokers.
In the next part of our series, we’ll see why investment products are expected to deliver for TD Ameritrade in 2016.
Browse this series on Market Realist: