Discount brokerage trading activity may have ended 2009 on a whimper, but it started 2010 with a bang.
Shares of E*TRADE (NASDAQ:ETFC) and TD AMERITRADE (NASDAQ:AMTD) are trading higher today after the brokers posted robust buying -- and more likely selling -- for the month of January.
Daily average revenue trades at E*TRADE were 4% higher than a year ago, and a hearty 21% sequential bump from its lethargic December action. TD AMERITRADE experienced a similar 22% sequential spike. It also came through with a huge year-over-year gain, but since the announcement doesn't break down how much of that is resulting from its recent acquisition of thinkorswim.com, we'll stick to the sequential win as the organic indicator.
The double dose of good news cements Charles Schwab's (NASDAQ:SCHW) upbeat report from last week. Schwab delivered a 23% sequential gain in trading activity (and an 8% uptick from January 2009).
A strong January bodes well for the discounters, especially since it came before several brokers began implementing price and fee cuts to encourage their less frequent traders to make portfolio moves. E*TRADE's showing also came before unleashing its latest series of televised ads during the Super Bowl broadcast.
This doesn't mean that Goldman Sachs was wrong when it talked down the three discounters two months ago, lowering the near-term price targets of TradeStation (NASDAQ:TRAD) and optionsXpress (NASDAQ:OXPS) as well.
The industry is still feeling the pinch of low interest rates and the negative impact on money market parking space. The recent commission snips may also eat into margins.
We will also have to let February play itself out. If January's surge was simply the result of panic selling as many stocks headed lower, brokerage clients may have some confidence demons to vanquish before buying back into the market.
Still, it's better to see huge sequential recoveries from the three major players than apathetic responses. New commission schedules will be counting on healthy trading activity to justify the client-friendly pricing.
In the market for a new discount broker? The way that rates and initial deposits are bouncing around, I can't say that I blame you. Check the sponsored broker comparison table in the Discount Broker Center to see if you can find the bargain-minded brokerage outfit that's right for you.
