TD Ameritrade on Cash Sorting
TD Ameritrade reported its latest earnings and hosted a conference call yesterday, and CEO Tim Hockey made a number of comments related to brokerage sweeps and money market investments. When asked if they will offer more competitive deposit rates, he said, "The nature of our business is that we think of the vast majority of the cash on hand as, call it transactional ready for the next opportunity to invest in. And so we found that the deposits themselves are generally quite sticky. When they're not, we have tiered interest rates to accommodate clients looking for yield. And as a fallback obviously we have other products that are available to them. So again, it's all on this continuum of what are clients thinking about in terms of the uses of their cash and how interested are they in keeping it. They're powder dry for a trade versus searching for yield. And as you know that's an ongoing interesting discussion to have relative to the yield environment. With the yields now seeming to and interest rates now seeming to have topped out for a period of time, it's one of the reasons why we think the cash sorting is maybe topped out or abating now." One questioner asked, "A good bit of cash is now in purchase money market funds and that's coming at the expense of the BDA balances. Have you guys given any thought or considered ways to monetize the balances to a greater extent that are in money funds? I guess one of the options available to you is to create your own money market fund product, but I don't know if there are other options that are potentially under consideration." CFO Steve Boyle responded, "We did see that as you noted. It did come down pretty significantly in this quarter relative to the prior quarter. And we do get paid on most of those funds that are moving either to Sweetwater [?] to purchase money funds. We receive remuneration for that. So it's a positive for us. It's obviously not as much as we earn if they were swept to deposits. But we're still keeping the money in-house and we are earning on them."
