TD Ameritrade CEO Likes Volatility at Market's ‘Frothy Top’

(Bloomberg) -- “Buying or selling, a trade is a trade,” TD Ameritrade CEO Tim Hockey says in a phone interview, adding that “days like today are good for trading.”

TD Ameritrade shares gained as much as 2.2 percent on Tuesday morning, while the S&P 500 index fell as much as 2.3 percent to its lowest intraday since May 29, as stocks across the board extended their slide. Hockey sees TD Ameritrade as somewhat “counter-cyclical,” as volatility helps profits.

TD Ameritrade clients tend to be net buyers on days with market declines, though they may hold onto cash if there’s a bear market. Asked where the market may be at the moment, Hockey says it may be “at the frothy top,” after a 10-year bull run. He flags global events and trade fears, along with Federal Reserve rate hikes. “There’s not a lot of continued upside from here in the economy.”

Though fees in his industry are under pressure, “in our particular space, we’re comfortable,” Hockey says. JPMorgan offering free trades wasn’t a surprise to him, as “free trading has been around a long time,” and wasn’t out of line with other firms.

Hockey is also okay with not buying E*Trade, which in recent days said it plans to remain independent. TD Ameritrade is “quite comfortable” with the prospects for growth going forward alone, Hockey says.

Stock-specific headwinds -- including Schwab price cuts, E*Trade uncertainty, and capital return -- “are slowly but surely falling by the wayside. Thus, we see a clearer path for share price outperformance,” Bernstein analyst Christian Bolu writes in a note.

On Monday, TD Ameritrade reported fourth-quarter adjusted earnings per share of 92c versus analysts’ estimate of 88c, with net new client assets of about $24 billion, an annualized growth rate of 8 percent, and average client trades per day of about 795,000, up 50 percent year over year.

To contact the reporter on this story: Felice Maranz in New York at fmaranz@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Scott Schnipper

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