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Shares of online brokerage firm E*TRADE Financial Corporation (ETFC - Analyst Report) rallied more than 1% after it reported an uptick in its Daily Average Revenue Trades (DARTs) for Feb 2014 on Mar 14. According to the monthly market activity report for February, E*TRADE’s DARTs were 201,223, up 3% from the prior month and 32% year over year.

Broker performance is generally measured through the DARTs that represent the number of trades from which brokers can expect commissions or fees.

At the end of the month under review, E*TRADE’s total number of accounts came in at approximately 4.7 million, of which about 3.0 million are brokerage accounts, 1.2 million are stock plan accounts and 0.4 million are banking accounts.

For the reported month, E*TRADE’s total brokerage accounts included 40,932 gross new brokerage accounts. Moreover, E*TRADE’s net new brokerage assets were $1.6 billion, increasing from $1.0 billion in the prior month. Total brokerage accounts reflect the company’s ability to attract and retain customers who trade and invest.

As of January end, E*TRADE’s customer security holdings were $186.4 billion, up 5.7% from the prior month. The company’s brokerage-related cash increased by $1.3 billion to $40.2 billion, with customers being the net buyers of about $0.3 billion securities. Moreover, bank-related cash and deposits for the company stood at $6.3 billion, in line with the prior month.

Peer Performance

TD Ameritrade Holding Corporation’s (AMTD - Analyst Report) average client trades per day of 501,000 in its Activity Report for Feb 2014 marked an all-time high in the company’s trading history. The figure represents a 1% rise, breaking the previous record of 496,000 in the prior month, when it rose 30% year over year.

Another sector participant –The Charles Schwab Corporation (SCHW - Analyst Report) reported average client trades of 556,400, representing a decline of 5% from the prior month, while it was up 10% from the prior-year period in its Activity Report for Feb 2014.

Our Viewpoint

Amid the challenging economy, increase in DARTs and new brokerage accounts will be beneficial for E*TRADE. Further, the company’s initiatives to reduce balance sheet risk appear to be promising, although they will put near-term pressure on the net interest margin.

We remain concerned about the sluggish macroeconomic environment, which might lead to lower trading activities. Moreover, mounting expenses and fluctuating interest rates are expected to impact the company’s financials in the near term.

E*TRADE currently carries a Zacks Rank #1 (Strong Buy). In the same industry, Investment Technology Group Inc. (ITG - Snapshot Report) holds the same Zacks Rank as E*TRADE.

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