REUTERS SUMMIT-TD Ameritrade clients start using their cash

Reuters - UK Focus

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By Jed Horowitz

NEW YORK (Frankfurt: HX6.F - news) , June 18 (Reuters) - The high levels of cash thatTD Ameritrade customers have been keeping in theirbrokerage accounts since the 2008-2009 financial collapse is onthe decline, a sign of growing confidence in the U.S. stockmarket, company executives said at Reuters Wealth ManagementSummit on Wednesday.

Cash represents about 19 percent of assets kept in more than4 million retail brokerage accounts at the Nebraska-basedbroker-dealer. In the previous five years, cash levels averagedbetween 20 percent and 22 percent, said Tom Bradley, presidentof retail distribution.

Cash levels of investment advisers whose clients haveaccounts at TD Ameritrade have dipped below 8 percent, addedThomas Nally, president of the firm's institutional division.

The investing behaviour of discount brokerage clients isclosely scrutinized on Wall Street as a sign of how robustlyinvestors are buying stocks and, more conservatively, bonds.

TD Ameritrade's retail clients are more active traders thanthose at rivals Charles Schwab Corp and E*TradeFinancial Corp, creating higher levels of cash thanbuy-and-hold investors as they trade in and out of markets.

Cash in the approximately 9 million brokerage and moneymarket accounts at Schwab declined from a peak of about 20percent in 2009 to 13 percent at the end of the first quarter,and generally ranges between 5 percent and 10 percent inaccounts that financial advisers keep for their clients at theSan Francisco-based firm, a Schwab spokesman wrote in an email.

E*Trade clients at the end of May kept 16 percent of theirassets in their 3.1 million accounts in cash, down from 19percent in March 2013, a spokesman wrote.

Separately, Bradley said clients appeared indifferent to TDAmeritrade's disclosure that it made $236 million in its lastfiscal year by selling their orders to trading firms andexchanges. The total was more than in the previous year andhigher than at Schwab and E*Trade.

Discount brokers do not share so-called payment for orderflow revenue with clients, but say it subsidizes low commissionsand does not affect their commitment to get the best executionfor trades.

On Tuesday, however, a TD Ameritrade executive told a U.S.Senate subcommittee that the company often routes orders toexchanges that pay it the most. The practice wascriticized in Michael Lewis' recent book, "Flash Boys."

Fewer than 200 of TD Ameritrade's more than 4 millionclients questioned the practice since the book's publication,Bradley said. But Nally said it was too early to judge theimpact of a "60 Minutes" TV interview in which Lewis said are fixed.

"Think about Mom and Dad sitting on the couch ... andhearing the markets are rigged," he said. "They'll startstuffing their money under their mattress."

Charles Schwab Chief Executive Officer Walt Bettingerrecently suggested that firms disclose how much they receive foreach trade order on a customer's confirmation statement.

"I wouldn't have a problem with that," Bradley said at theWealth Summit.

(Reporting by Jed Horowitz; Editing by Lisa Von Ahn)

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