TD Ameritrade Holding Corporation (NYSE: AMTD) is today disclosing information as it relates to revenue sharing 1 it receives for the trade orders routed to market destinations for execution. The Company plans to disclose this revenue on a quarterly basis, beginning with its June Quarter earnings release in July 2014.
The Company earned order routing revenue of $236 million, $184 million and $185 million for fiscal years 2013, 2012 and 2011, respectively. Note that less than 50 percent of its 2013 revenue sharing came from stock transactions.
TD Ameritrade employs sophisticated order routing technology and processes to help it meet its obligations to seek best execution for client orders. The system is flexible, with the ability to route to several destinations in an effort to seek best execution quality. Clients also have the option to choose from a list of direct-routing destinations.
TD Ameritrade does not internalize its clients’ orders. Instead, it works with multiple market destinations to encourage competition and create redundancies that help maintain a seamless client experience. The Company holds these market destinations to high performance standards, as it evaluates their stability, execution quality and consistency daily. In the unlikely event of a degradation of service, TD Ameritrade has the flexibility to adjust by quickly routing orders to another venue. Information regarding the revenue sharing arrangements the Company’s broker dealer subsidiaries have with each of these market destinations is disclosed publicly via SEC Rule 606 reports, client agreements and client account statements.“Many market destinations are in the business of making markets. They provide liquidity, and revenue sharing is part of their business model,” said Fred Tomczyk, president and chief executive officer. “There exist today comprehensive regulations and oversight, disclosure and industry competition, as well as the many checks and balances we have implemented over the years, to ensure that we remain focused on satisfying our obligation to seek best execution on behalf of our clients. Without their trust and satisfaction we wouldn’t have a business, and we could not maintain either of them if we didn’t deliver on our promises to the best of our abilities.”
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