The online brokerage firm,
E*TRADE Financial Corporation
), reported a slump in Daily Average Revenue Trades (DARTs) in
October. According to the monthly market activity report for
October, E*TRADE's DARTs were 124,246, declining 21% from October
2011 and 10% from September 2012.
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Broker performance is generally measured through the DARTs that
represent the number of trades from which brokers can expect
commissions or fees. The fall in DARTs largely resulted from the
uncertain economic recovery and investors' reluctance to invest
in the equity markets.
At the end of the month, E*TRADE's total number of accounts came
in at approximately 4.4 million, of which, about 2.9 million are
brokerage accounts, 1.1 million are stock plan accounts and 0.4
million are banking accounts.
In October, total brokerage accounts of E*TRADE included gross
new brokerage accounts of 23,365 and net new brokerage accounts
of a negative 5,153. Moreover, in October, net new brokerage
assets were $0.3 billion, contracting from $0.5 billion in the
prior month. As a matter of fact, total brokerage accounts and
net new brokerage accounts symbolize the company's ability to
attract and retain customers who trade and invest.
During the month, E*TRADE's customer security holdings were
$138.6 billion, down 1.8% from the prior month. Further,
brokerage-related cash moved down 2.8% from last month to $31.7
billion, with customers being net buyers of about $1.3 billion in
securities. Moreover, bank-related cash and deposits descended
1.4% from September and ended the month at $7.1 billion.
Nearly in line with E*TRADE, in its monthly market activity
report for October 2012,
The Charles Schwab Corporation
) reported almost flat DARTs compared with the prior month and
waned 14% from the prior-year month to 439,700. This implies that
the company witnessed insufficient trading activity. Further, the
month was also impacted by weather-related market closures for
TD Ameritrade Holding Corporation
) also reported a fall in DARTs both from the prior-year month
and prior month. DARTs for October were 330,000, down 19% year
over year and 7% from the prior month.
Amid the challenging economy, sliding DARTs and new brokerage
accounts remain a matter of concern. Lower trading activities,
fluctuating interest rates and sluggish equity markets are
expected to continuously impact the company's financials in the
Yet, E*TRADE's initiatives to reduce balance sheet risk appear to
be promising, although, it will put near-term pressure on the net
interest margin. Moreover, its expense discipline and better
capital position are impressive and are expected to aid the
company in navigating through the current cycle.
E*TRADE currently retains a Zacks #3 Rank, which translates into
a short-term Hold rating. Considering the fundamentals, we also
maintain a long-term Neutral recommendation on the stock.