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Trading Volumes at Discount Brokerages Tumble

Trading volumes at TD Ameritrade and E*Trade tumbled 37 percent in August as uneasiness about the global economy kept Main Street investors away from the equities markets.

NEW YORK -- Trading volumes at online trading firms TD Ameritrade Holding Corp and E*Trade Financial Corp tumbled 37 percent in August as uneasiness about the global economy kept Main Street investors away from the equities markets.

TD Ameritrade, the No. 1 U.S. brokerage by trading volume, said on Tuesday its clients made an average of 303,000 trades per day in August, down 37 percent from a year earlier and down 9 percent from July. It was the lowest monthly tally for the company since December 2008.

The August trading volumes were 6 percent below the expectations of JMP Securities analyst David Trone.

Client trading levels so far in 2012 for TD Ameritrade, which ends its fiscal year on Sept. 30, are at their lowest in five to seven years, Chief Executive Officer Fred Tomczyk said at the Barclays Global Financial Services Conference on Tuesday.

"This is an abnormal year," Tomczyk said. "If I was going to go back five years ago and paint a stress test for the online brokerage industry, well, I think we've seen it and have been living through it."

He said the European sovereign debt crisis, the fragility of the U.S. economy, upcoming U.S. fiscal deadlines known collectively as the "fiscal cliff" and regulatory uncertainty were all taking a toll on investor confidence.

Separately, E*Trade said in a regulatory filing that its clients made an average of 121,570 daily average revenue trades in August, also down 37 percent from a year earlier and down 5 percent from July.

E*Trade said it would release other metrics for August, including loan performance data, on or about Sept. 19.

Trading represents about 40 percent of annual revenue at TD Ameritrade, nearly 30 percent at E*Trade and about 20 percent at Charles Schwab Corp.

ASSETS LEVELS RISING

One factor that has been working in the favor of the discount brokerages has been the trend of financial advisors moving from full service brokerages to the independent space. The discount brokerages provide back office services to registered independent advisers and also custody their assets.

TD Ameritrade said it had $461.2 billion in total client assets as of Aug. 31, up 15 percent from August 2011 and up 3 percent from July 2012.

Average client and brokerage-related assets were up 12 percent from a year earlier and 2 percent from July at $76 billion. Average fee-based balances, invested in areas such as money market funds and mutual funds, rose 18 percent from a year earlier and 3 percent from July to $93.4 billion.

Last August, volatility spiked on concerns over Europe's debt crisis and the downgrading of the U.S. credit rating, leading to a big increase in trading as investors tried to keep up with wild market swings. TD Ameritrade notched three of its four busiest trading days ever during the month.

TD Ameritrade shares closed up 1 percent at $17.44 on Tuesday afternoon in New York, while the shares of E*Trade were up 2.2 percent at $8.94.

Copyright 2010 by Reuters. All rights reserved.

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