TradeStation Group, Inc. (TRAD)

Q2 2010 Earnings Call

July 22, 2010, 11:00 am ET

Executives

Salomon Sredni - President, Chief Executive Officer, Director

David Fleischman - Chief Financial Officer, Vice President of Finance, Treasurer

Analysts

Rich Repetto - Sandler O'Neill

Patrick O'Shaughnessy - Raymond James & Associates

Mike Vinciquerra - BMO Capital Markets

Niamh Alexander - Keefe, Bruyette & Woods

Chris Ross - Macquarie

John Rowan - Sidoti and Company

Matt Snowling - FBR Capital Markets

Presentation

Operator

At this time I would like to welcome everyone to the TradeStation Group second quarter 2010 earnings conference call. (Operator instructions)

I’d now like to turn the call over to Mr. David Fleischmann, Chief Financial Officer. You may begin your conference.

David Fleischmann

Thank you, Christopher. Good morning and welcome to the TradeStation Group second quarter 2010 conference call.

Today’s conference call is being broadcast live over the Internet and will be archived for the next 90 days at www.tradestation.com. We would like to thank all of our listeners including shareholders, customers and analysts for joining us this morning.

My name is David Fleischmann, Chief Financial Officer of TradeStation Group. Here with me today is Salomon Sredni, our Chairman of the Board and Chief Executive Officer.

By now, you should have seen our financial results released this morning. If you have not, they are available at our company website, www.tradestation.com in the Investors Relations section. Also, if you are accessing this call through our website, please note that some of the prepared comments you are about to hear are accompanied by graphs and charts, and we invite you to view them as you listen.

Before we start, I would like to emphasize that this conference call will include statements that are forward-looking and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act. All forward-looking statements are based on current expectations and beliefs, and actual results may differ materially from the results suggested in this conference call.

Factors that may cause or contribute to such differences include those set forth in today’s earnings release, other press releases recently issued and in the company’s filings with the Securities and Exchange Commission. Please note that the company undertakes no obligation to update any information presented in this conference call.

With that said, it is my pleasure to hand over the call to Salomon Sredni.

Salomon Sredni

Thank you David and good morning everyone. The 2010 second quarter, again showed a positive correlation in our business between increased market volatility and higher client trade volume. Compared with the 2010 first quarter, when market volatility was lower, our brokerage commissions and fees increased 13% and our DARTs increased 16%.

Despite a continuing tough environment, we also generated a 5% increase in our brokerage accounts base year-over-year and have client assets of over $2.1 billion now.

Let me share with you some of the metrics underlying in our second quarter results. DARTs in the 2010 second quarter were nearly 93,000 indicating a robust level of activity during what is obviously a charging environment for the individual trader market.

Please keep in perspective that our DARTs were produced by roughly an average of 47,000 accounts, a powerful indicator of the leverage of our active trader business model. That is obviously a small fraction of the number of accounts our larger competitors require to produce that many trades.

We attribute our strong DART results to increase market volatility, strength the diversity of our service offering across various asset classes and the robustness of our business model.

Now that market volatility is again lower, our July DARTs through yesterday were 80,000. We have also continued to grow our account base. We grew to over 47,300 accounts in the 2010 second quarter, a record total and a 5% increase in the size of our customer base year over year.

Since we released the TradeStation brokerage platform in the third quarter of 2001, we have increased our TradeStation customer account base every quarter, 35 consecutive quarters of record total TradeStation brokerage accounts.

Despite this accomplishment, our sequential account growth during the second quarter was lower than we want it to be, and lower than what we have achieved in previous quarters. So, we continue to focus on lower approaches to generate higher account add in the coming months. These approaches include returning to more focused TV advertising.

During the second quarter, we experimented with not doing general TV ads. This quarter we will be returning to TV advertising, but with a much more focused approach. We also continue to sharpen our web marketing campaigns and lead generation in general.

The third quarter is typically is high for our current attrition and we expect somewhat higher attrition in this quarter as well, but are hopeful that we will see improved net account growth results by the 2010 fourth quarter.

Our brokerage account metrics are once again among the very best in the industry. During the 2010 second quarter, on an annualized basis, our average accounts rated nearly 500 times and produced nearly $2,900 in revenues, both substantially higher than the results produced by the majority of our competitors.

Again, the value of the resiliency and resiliency of accounts over our active trader client base was clearly demonstrated.

At this point, I would like to return the call back to David who will review our second quarter 2010 performance from a financial perspective, as well as our 2010 third quarter and revise full year business outlook and then I will come back to review some recently completed or pending initiatives that we believe will generate high revenues for our business. David.

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