This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Online Brokers: 'Buy'em When They Feel the Worst'

NEW YORK ( TheStreet) -- Online brokers may have seen a dip in trading volumes during August, but retail trading likely outpaced institutional volumes for the second consecutive month, according to Sandler O'Neill & Partners.

Based on so-called channel checks conducted by Sandler analyst Rich Repetto, daily average revenue trades (DARTs) at the three largest online brokers, TD Ameritrade (AMTD - Get Report), E*Trade Financial (ETFC - Get Report) and Charles Schwab (SCHW ), fell 5% in August, he writes in a research note. Repetto notes, however, the decline could be plus or minus 2.5%.

E*Trade's daily average trades declined the most since last year, down 36.2% to 122,700, the note estimates. The other two online brokers also had double-digit declines from the year-earlier periods when markets were experiencing broad rebound and heavy trading among high-volatility stocks , such as financials.

The brokers are expected to release their latest monthly DART metrics in mid-September.

However, consolidated tape volume - which are trades across the New York Stock Exchange as well as NYSE Euronext's (NYX) smaller exchanges -- dropped roughly 12.6% in August. It is the second straight month in which retail trading outperformed the institutional side, according to the note.

Average daily dollar volume declined 12.9% to $141.7 billion.

Repetto noted that 10 of the 12 slowest trading days this year were in August and the other two in July.

"We suspect that one potential cause is less buy side activity from institutional firms that are experiencing consistent outflows (16 straight weeks) from their domestic equity mutual funds," Repetto writes.

The slowdown in trading can be seen in two of the most actively traded stocks - Citigroup (C - Get Report) and Bank of America (BAC).

Citi's three-month average volume is now at 506 million, for example, with roughly 310 million shares traded by 2 pm ET on Wednesday. That compares to the upwards of 1 billion shares traded daily seen in Citi's stock on several days in the second quarter.

The combination of lower volatility, record low short-term interest rates and general seasonal slowdown in the summer months is proving to be a nuisance for the online brokers, since they garner a significant portion of their revenue from DARTs.

Both Schwab and TD Ameritrade hit 52-week-lows on Tuesday. The shares are down 26% and 32%, respectively since the May 5 flash crash. E*Trade shares are down 25% since May 5, Repetto says.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AMTD $31.81 -0.84%
C $51.30 0.04%
CME $88.45 -1.20%
ETFC $26.25 -0.23%
ICE $231.31 -0.90%


Chart of I:DJI
DOW 17,110.81 -21.05 -0.12%
S&P 500 2,014.89 +15.91 0.80%
NASDAQ 4,821.0050 -17.6380 -0.36%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs