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Investors Still 'Cautious': TD Ameritrade CEO

TD Ameritrade logo
TD Ameritrade logo

Individual investors remain cautious, due to the lingering effects of the recessionand the so-called flash crash, TD Ameritrade President and CEO Frederic Tomczyk told CNBC Friday, but he said that they will eventually come back.

“It hasn’t been great if you’ve been in equities,” said Tomczyk. "The flash crash and the economy have had an impact. More people are saving and taking responsibility for their retirement.”

The flash crash on May 6sent the Dow Jones industrial average plunging nearly 1,000 points in less than a half-hour, causing panic among investors.

Over half of TD Ameritrade's revenues in 2009 came from trading, compared with 24 percent for rival Charles Schwab.

“When we did our earnings call in July, we said it felt like more like a slow summer and it has been,” he added. “It has been a very slow summer in institutional trading and in retail trading. I’m a little more optimistic as we head into the fall.”

Tomczyk noted that the company makes no money from select ETF [exchange-traded fund] trades, a practice it copied from the mutual funds industry. He added that the company offers the trades at no commission, if investors hold on to the stock for at least 30, as an incentive to use TD Ameritrade for other types of transactions that charge fees.

According to the CEO, the company has seen a 44 percent rise since 2007 in the number of long-term investors who hold ETFs.

TD's trading volume activity, according to Raymond James, accounts for about 35 percent of its quarterly revenue. A 25-basis point increase in the Federal funds rate would be the equivalent of a $0.07 rise in the company’s annual earnings, reported Barron’s.