Omaha-based TD Ameritrade is benefiting from two forces coursing through markets: rising interest rates and increased volatility.
Rising rates give TD Ameritrade the opportunity to earn income from customer money — that parked with the company waiting to be deployed as investments; in the meantime, TD Ameritrade can invest some of that money itself and earn interest off it. The higher interest rates go, the more TD Ameritrade makes.
Customers who have cash sitting in their accounts — “dry powder for trades,” TD Ameritrade Chief Executive Tim Hockey called it — mean revenue for the company.
Uncertain markets — with on-again, off again trade proposals and global and domestic political uncertainty, even amidst strong U.S. employment figures — also allow TD Ameritrade to cash in: The more people buy and sell based on the latest headline, the more TD Ameritrade brings in from those trades.
The company saw a record 810,000 trades a day, on average, during the fiscal year that ended on Sept. 30. In October, it’s busted through that average already on four days with more than a million trades, a spokeswoman said.
“Volatile markets mean people are trading,” Hockey said.
The company continually beefs up its technological systems to be able to handle that trade volume, Hockey told The World-Herald, so trading activity per se won’t affect staffing levels in Omaha, but as the business grows more generally, “then you do add staff,” he said, assuming that growth is profitable.
Staff has been added to the Omaha headquarters since the $2.7 billion purchase last year of St. Louis-based Scottrade. Before the acquisition, about 2,000 people worked at the Omaha home office; a recent headcount is at around 2,500.
Could more acquisitions be in the offing? Some Wall Street analysts have speculated that TD Ameritrade could buy competitor E-trade. To those rumors, Hockey said that “We will continue to look at things that make strategic and financial sense” but that the Omaha company was quite happy to continue competing against the New York-based rival.
The company reported better-than-expected earnings of 92 cents per share earlier this week, compared with the 88 cents that Wall Street analysts had been expecting. Its stock gained 2.75 percent on Tuesday to close at $51.24 a share, even as the broader market declined a half-percent.