NEW YORK Feb 12 Online brokers this week
reported higher daily trading volume for January as people who
sold businesses, properties and investments late last year to
escape higher 2013 taxes began putting their cash to work.
Daily average trades on which brokers collected commissions
rose 18 percent from January 2012 at E*Trade Financial Corp
and 17 percent at TD Ameritrade Holding Corp,
the companies reported in their monthly activity reports.
Compared with December, when investors worried about fiscal
cliff and lingering euro zone problems, trading was up 6 percent
at E*Trade and 3 percent at TD Ameritrade.
Charles Schwab Corp., the biggest publicly traded
online broker by market capitalization, has not yet posted its
monthly trading figures. At a business update meeting last week,
Schwab executives said daily average revenue trades grew in
January but were still below expectations in a post-election
"Trading did definitely pick up from late last year, but
again it's not anywhere near the levels that you might
anticipate in history," said Schwab Chief Executive Walt
Bettinger. People are investing across the board in funds, bonds
and stocks but "trading, not so much," he said.
Investors and analysts are keeping a close watch on trading
volume at discount brokers to gauge investor sentiment about the
market. However, brokerage executives say that commission-based
trading figures are gradually becoming less important as they
more aggressively market fee-based accounts that provide revenue
regardless of how much trading takes place.
In addition to reporting trading volume, E*Trade on Tuesday
said total customer assets at the end of January grew 13.3
percent from a year earlier and 4.4 percent from December 31 to
E*Trade, a New York-based company that is winding down its
mortgage-plagued bank activities to focus fully on its
brokerage, said net new assets collected in January fell to $800
million from $1.2 billion in December.
At TD Ameritrade, total client assets were up 17 percent
from a year ago and 4 percent from a month ago to $499.3
Omaha, Nebraska-based TD Ameritrade did not break out net
new assets, but its executives warned earlier that they are
unlikely to continue at the high rates of December. It said
average balances in brokerage, margin and other spread-based
accounts grew 3 percent in January from the previous month while
fee-based balances were up 5 percent from December.
Shares of TD Ameritrade were up 1.3 percent in late morning
trading on Tuesday while E*Trade shares were up just under 1.0
percent. Schwab shares were up 0.9 percent.
Joe Martinetto, chief financial officer of Schwab, said
trading this year remains a "wild card" but told analysts to
expect more revenue to shift to fee-based products. "That's just
the basic progress of the business model," he said, noting that
Schwab just introduced a commission-free suite of
exchange-traded fund products.
Commission-based revenue continues to drop as a percentage
of revenue at TD Ameritrade, which is the largest of the big
online companies as measured by daily revenue trades. In its
fiscal first quarter, ended on Dec. 31, transactions generated
39 percent of net revenue, and for its full fiscal year 2012
were 41 percent of net revenue. Commissions several years ago
produced more than 60 percent of most discount brokerage
Schwab management said that commission-free trades are
likely to increase as a percentage of total client trades in
2013, one factor behind Citigroup analyst William Katz's
decision on Monday to downgrade his recommendation on Schwab
shares to "sell" from "neutral."
Katz's primary reason for the downgrade was that Schwab
shares are over-valued at about 23 times his estimated 2013
operating earnings, as well as his view that revenue growth is
becoming too dependent on growth of assets at Schwab's bank