Stock trading volumes have fallen steadily throughout this year. Increased program trading and concerns over Iraq and energy costs are just a few of the contributing factors to the lagging activity, which has in turn beaten down the shares of discount and online brokers. But the carnage in this sector over the past two months has the current valuations of these stocks starting to look tempting on the surface, so we took a closer look at these companies.

First up is Ameritrade ( AMTD). The company has already warned that its fiscal third-quarter results would come in at the low end of its guidance range of 14 cents to 22 cents a share on weaker trading volumes. The stock is down 28% this year on lower trading volumes and concerns over the speculated retirement of CEO Joe Moglia, who was hired in 2001 and has since crafted the company's impressive earnings turnaround.

Ameritrade has been buying back stock during this downturn and picking up new brokerage accounts. On a historical basis, the stock is relatively inexpensive here at $10.13, or 15 times 2005 estimated earnings.

We believe this stock could be range bound, though. Investors have gained a lot of confidence in Moglia, and they will need to see some clarity on the CEO issue and a pickup in trading before bidding this stock higher.

The second stock we took a look at, E*Trade ( ET), is more than just an online broker now. Led by CEO Mitch Caplan, the company has branched into the mortgage and banking business.

While the move to a less trading-dependent revenue model could help soften the blow of sluggish retail trading volumes in the near term, the cyclicality of its mortgage and banking business may also cap its earnings multiple, which is currently 11 on the basis of 2005 estimated earnings.

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