UPDATE: Online Brokers See Higher Trading Volumes In August
September 15 2009 - 1:44PM
Dow Jones News
A surge in the trading of low cost financial stocks gave online
brokers a big boost in August.
The big three - Charles Schwab Corp. (SCHW), TD Ameritrade
Holding Corp. (AMTD), and E*Trade Financial Corp. (ETFC) - all
posted double digit monthly gains in daily average revenue trades,
or DARTs - a figure closely watched by analysts. Electronic trader
Knight Capital Group Inc. (NITE) also posted a 7.7% sequential
increase.
The rise in trading volumes at the four firms is unusual, given
that summer is typically known for lighter activity as many traders
are on vacation. Analysts say the data in August mainly reflects a
movement toward beaten-down names - a trend which isn't likely to
continue.
"Trading in active exchange-traded-funds and low-cost financials
were up 39% and 139%, respectively, in August, with five individual
stocks - Citigroup Inc. (C), Bank of America Corp. (BAC), American
International Group Inc. (AIG), Fannie Mae (FNM), and Freddie Mac
(FRE) accounting for up to 30% of NYSE exchange traded volume,"
wrote JMP Securities analyst Michael Hecht in a note to
clients.
Industry watchers, such as Sandler O'Neill analyst Richard
Repetto, don't expect trading to fall-off completely, but suffer
from a "relatively slow start to the month."
Repetto is forecasting DARTs that are flat to a 5% decrease from
August.
On Tuesday, Charles Schwab said its DARTs rose 15% from July and
climbed 24% from a year ago, while TD Ameritrade's client trades
rose 16% from last month and surged 71% from a year earlier. Rival
E*Trade, which has been damaged from losses within its bank's
mortgage portfolio, posted a monthly DART increase of 18% and said
trades climbed 37% from a year ago.
Knight Capital August U.S. average daily trading volume climbed
7.7% from July on a dollar basis and surged 53% from a year
earlier.
Investors continue to return to the market as the major stock
indexes strengthen. However, damage from the financial crisis and
market weakness earlier in the year still remain.
Charles Schwab Chief Financial Officer Joe Martinetto said
investor engagement is encouraging, but said the company's revenue
is under near-term pressure as trading activity lags second-quarter
levels and short-term interest rates remain low.
Martinetto said he expects fee waivers resulting from declining
yields in the company's money market mutual funds to rise to $80
million in the third quarter from $30 million in the prior quarter.
As a result, the company expects asset-management and
administration fees to drop sequentially by up to 8% to 10%. Lower
rates also have reduced investment portfolio yields, which could
result in a 2% to 4% reduction in third-quarter net interest
revenue.
Schwab's total client assets rose 3% during the month as stock
markets continued to rise and as net inflows were $8.5 billion. TD
Ameritrade said its total client assets rose 3% from July, but fell
5% from a year earlier. E*Trade, which has taken steps to shore up
its capital position, said its total client assets increased 2.6%
from July but were down 13% from a year earlier at $142.3
billion.
Shares of Charles Schwab recently traded down 2.8% at $17.85. TD
Ameritrade was off 1% at $19.49, while E*Trade rose 3.4% at
$1.84.
-By Brett Philbin, Dow Jones Newswires; 212-416-2173;
brett.philbin@dowjones.com and Mike Barris, Dow Jones Newswires;
212-416-2330; mike.barris@dowjones.com