“Nearly every client engagement metric from logins to number of accounts that traded was up for the quarter. More clients were logging in; more clients who were logged in were trading, and more of the clients trading were trading more,” said Fred Tomczyk, President and CEO, on the TD Ameritrade Holding Corp.(NYSE:AMTD) earnings conference call. “Engagement was up across all four of our key platforms with mobile leading the way. Retail investor behaviour continues to suggest an increasingly bullish sentiment,” he added.

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Tomzyk also said in the call that an optimistic macro-economic environment (benign inflation, steady job numbers, improving economic growth) has helped fuel “continued broad-based retail engagement.” Not surprisingly, the company’s results saw the beneficial impact of such record trading, as well as record margin lending.

TD Ameritrade’s earnings beat

TD Ameritrade Holding Corp.(NYSE:AMTD) declared Q1 EPS of $0.35 and revenue of $812 million which beat analysts’ forecasts by $0.01 and $12.2 million respectively. On an annualized basis, revenue was up by 19.6%, marking the second consecutive record quarter for net revenues.

Net new client assets totaled $12.2 billion, up 8% annualized. Average client trades per day during the quarter reached a record 492,000 and propelled the activity rate to 8.1% – the highest witnessed in a decade.

Higher margin lending boosts bottom line

Higher trading levels also pushed up the company’s margin lending.

In an April 23, 2014 research note on TD Ameritrade Holding Corp.(NYSE:AMTD), BMO Capital analysts David J Chiaverini and Richard Fellinger said: “EPS beat our estimate owing to a higher-than-expected NIM (1.52% vs. 1.46% est.). Interest earning assets drove the increase owing to record margin balances of $10.5 billion (+13% q/q, +24% y/y) and the subsequent positive impact on the yield in its securities lending book.”

The company said full-year EPS could be in the range of $ 1.20-$ 1.40, and could even surpass that range if trading activity remained strong.

Company’s comments on market structure and HFT

Tomczyk also commented on the conference call that the US equity market was one of the best functioning and most efficient markets globally, offering low cost of trading, narrow spreads, excellent liquidity and improved execution speed.

“But to broadly say that all high-frequency trading is bad is like saying that the advancement of technology big data and analytics is bad,” he said in the context of the recent controversy sparked by a book on high-frequency trading.

After explaining the order flow process at TD Ameritrade Holding Corp.(NYSE:AMTD), he acknowledged that there were some areas that could be reviewed, studied and improved for the benefit of investors.

“Areas we think deserve attention include equal and timely access the information, the number of order types in the market, order to trade or quote to trade ratios, and technology resilience — resiliency in an effort to address a number of the glitches that have occurred,” said Tomzyk.

BMO Capital’s rating

BMO Capital maintains a Market Perform rating on TD Ameritrade Holding Corp. (NYSE:AMTD) with a price target of $36.

The stock is currently trading at $31.73, down 1.55%.