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TD Ameritrade Holding Corporation (AMTD - Analyst Report) – an online brokerage firm – reported a 3% rise in average U.S. trades in its Activity Report for the month of November 2012. However, the U.S. trades declined 10% on a year-over-year basis.

For the reported month, Daily Average Revenue Trades (DARTs) were 341,000, up from 330,000 recorded in the prior month. The rise in DARTs largely resulted from the improvement in the equity markets.

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

For the month, TD Ameritrade reported $475.1 billion in total client assets, up 18% year over year and 1% from the prior month. Moreover, average spread-based balances augmented 8% year over year to $79.0 billion. Further, these balances hiked 2% from October 2012.

At the end of November this year, average fee-based balances were recorded at $99.4 billion, which surged 28% year over year and 1% from the last month.

Quarterly Performance

As of Sep 30, 2012, DARTs were 328,280, plummeting 21% year over year. Net new client assets reported were $10.1 billion in the quarter, down from $12.4 billion in the year-ago quarter.

For the quarter, TD Ameritrade reported $472.3 million in total client assets, up 24.7% year over year. Moreover, average spread-based balance was $76.2 billion, compared with $67.5 billion in the prior-year quarter. Average fee-based balances were recorded at $93.6 billion, soaring 16.9% year over year.

Our Viewpoint

The competitive position of brokerage business in the market depends on trading customers, with emphasis on active traders. As the long-term investing customer group is less developed compared to trading customers, there is an opportunity for future growth in case the long-term customer base expands.

Development of innovative ways for online trading and long-term investing products and services, delivery of advanced customer service, creative and cost-effective marketing and sales, as well as expense discipline can be considered as the key factors behind TD Ameritrade’s strategy of boosting its trading and investing business.

Amidst a volatile operating environment, TD Ameritrade exhibited a decline in organic client asset. The company also reported waning trading volumes, and therefore significant turnaround remains elusive. Further, a low interest rate environment is a matter of concern.

TD Ameritrade currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Later this week, among TD Ameritrade’s peers, Charles Schwab Corp. (SCHW - Analyst Report) and E*TRADE Financial Corporation (ETFC - Analyst Report) are expected to release their Monthly Activity Report for November.

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