UPDATE 2-Strong March trading helps OptionsXpress meet St. view

* Q1 EPS $0.23 Vs Est $0.23

* DARTs up 23 pct

* Added 9,700 new accounts in Q1

* To buy Optionetics for about $20 mln

* Shares up 7 percent

(Recasts, adds conference call details, analyst comments, share movement)

By Sweta Singh

BANGALORE, April 28 (Reuters) - Online brokerage optionsXpress Holdings Inc's (OXPS.O) quarterly profit slumped 43 percent, but strong trading activity in March and new customer accounts helped it meet Wall Street estimates in the face of a challenging market environment.

"While the economic backdrop weighed on new account growth in the first quarter, we were encouraged that our investor education efforts were successful in attracting new investors to the platform," finance chief Adam DeWitt said in a statement.

New customer account grew 18 percent to 328,300. The company saw a "meaningful pickup in new account generation in March," it said.

OptionsXpress said total daily average revenue trades, or DARTS -- a key performance measure for retail brokerage firms -- stood at 46,800 in the quarter, up 23 percent from a year before. Institutional DARTs were 15,100 in the first quarter.

For both January and February, the company recorded a fall in retail DARTs from a year ago.

"While the economy and the retail trading environment remain under pressure we saw improvements throughout our business in March which have continued into April," Chief Executive David Fisher said in a conference call with analysts.

OptionsXpress, a Chicago-based brokerage firm, offers trading in stocks and bonds. But it specializes in the equity options and futures business for online investors.

The main reason that profits are down is because of lower short-term interest rates, something out of the company's control and people understood that going into the quarter, analyst Edward Ditmire of Fox-Pitt Kelton said.

Net income came at $13.6 million, or 23 cents a share, in-line with analysts' estimates, but much lower than year-ago earnings of 38 cents a share.

Revenue fell 19 percent to $49.3 million, but beat analysts' estimates of $48.0 million. Interest revenue and fees fell 68 percent.

OPTIONETICS DEAL

The company said it will acquire investment education firm Optionetics for about $20 million in cash as it looks to increase its brokerage customer base.

Not only did March turn out to be a better month than February but the acquisition of Optionetics should bolster their ability to attract new customers, Ditmire said.

The transaction is expected to close in the next two to four weeks and will have no significant impact on 2009 earnings, the company said.

OptionsXpress expects Optionetics to generate about $45 million to $55 million in revenue and between a pre-tax loss of $2 million and pre-tax income of $2 million.

"I think the merger is an acknowledgement of customer demand for further education for options," Wade Cooperman, chief executive of brokerage tradeMONSTER said.

It is best to give customers a choice that fits their particular needs and partnering with just one education firm may or may not meet those needs, Cooperman said.

In January, yet another online broker, TD Ameritrade Holding Corp (AMTD.O) agreed to buy investor education firm thinkorswim Group Inc in a $606 million deal to establish itself in the fast-growing area of options and futures trading.

In the lucrative U.S. options space, the company faces stiff competition from many online brokers, such as TD Ameritrade Holding.

The company does expect to see more consolidation in the broker space and expects to play a "meaningful" role in it.

"There's only a few brokers larger than us and a lot smaller than us, so we can see us playing a pretty meaningful role in consolidation over the next year or two," a company executive said in a call with analysts.

The company had $165.3 million in cash and cash equivalents as of March 31.

Shares of the company were trading up 6 percent at $14.81 in midday trade on Nasdaq. The stock has lost 35 percent in the last 12 months. (Additional reporting by Doris Frankel in Chicago; Editing by Jarshad Kakkrakandy)