Good day everyone and welcome to the TD Ameritrade Holding Corporation’s June Quarter Earnings Results Conference Call. Today’s conference call is being recorded. With us today from the company is President and Chief Executive Officer, Fred Tomczyk; and Chief Financial Officer, Bill Gerber. At this time I would like to turn the conference call over to Bill Murray, Managing Director of Investor Relations. Please go ahead, sir.

Thank you. Good morning everyone and welcome to the June quarter earnings call. Please refer to our press release and June quarter earnings presentation, which can be found on amtd.com. The earnings presentation includes our Safe Harbor statement and reconciliation of certain non-GAAP financial measures to the most comparable GAAP financial measures. Descriptions of risk factors are included in our most recent financial reports, Forms 10-Q and 10-K, and as usual this call is intended for investors and analysts and may not be reproduced in the media in whole or in part without prior consent of TD Ameritrade. Please limit your questions to two as we’d like to cover as many analysts as possible. And with that, let me turn the call over to Fred.

Thanks Bill and good morning and welcome everyone. Well, we are now three quarters into fiscal 2014, with one quarter to go and our story remains one of continued strong organic growth, while remaining very well positioned for an improved macroeconomic environment. We had strong asset gathering results in the quarter, while lower volatility did result in lower trading activity. Let’s take a look at the quarter’s key highlights on slide three. We ended the quarter with net revenues of $763 million, up 5% year-over-year and diluted earnings per share of $0.34, up 3% year-over-year. Year-to-date earnings per share were $1.04, up 21% year-over-year, driven by strong revenue growth of 13%. Client assets totaled $650 billion, up 24% year-over-year. Net new client assets were $13.4 billion, a 9% annualized growth rate. Our average client trades per day for the quarter were 401,000, an activity rate of 6.5%. We grew average fee-based balances to a record $139 billion, up 17% year-over-year. Interest sensitive assets ended the quarter at $97 billion, up 3% year-over-year, and we took advantage of the environment to repurchase shares of our common stock, buying back 2.9 million shares during the quarter. Let‘s take a closer look at how each piece of our growth strategy faired starting with asset gathering on slide four. This quarter we brought in $13.4 billion in net new client assets, a 9% annualized growth rate. That brings us to a total of $40 billion or a 10% annualized growth rate for the first nine months of fiscal 2014. The June quarter is typically a challenging quarter for asset gathering because of tax season outflows. However, retail posted solid results and institutional had a particularly strong quarter. On the retail side, continued optimization of our marketing efforts and greater efficiencies built into our sales…

Thank you Fred and good morning everyone. Coming off our best trading quarter in the company’s history in March, we had strong momentum going into the third quarter. However, trading pulled back as somewhat expected. Nevertheless, we were able to still deliver solid results due to continued strong revenues and asset gathering, as well as the planned reduction in advertising spend. In fact, our revenue this quarter was the second best quarter in our history, only trailing last quarter. This fiscal year we have delivered the three best revenue quarters ever. Year-to-date our net revenues are up 13% from last year and our earnings per share is up 21%, very strong numbers for us. Earnings per share for the June quarter came in at $0.34 with strong operating and pretax margins. For a closer look at the results, let’s begin with the financial overview on slide eight. We’ll start with the June to June comparisons on the left side of the page. Note that there was one less trading day this quarter. Despite this being the case, our transaction based revenue was virtually flat in both trades per day and rate. On line two, asset based revenue is up $46 million, driven by several factors. First, margin balances again reached record levels during the quarter, which contributed $24 million of the revenue pickup. Our fee-based balances were up over $20 billion, driving $11 million in additional revenue. Lastly, we continue to see the healthy returns in our stock lending business, which contributed $8 million in revenue growth. Overall, this helped drive a total of $38 million increase in net revenues as seen on line four. On line five, operating expenses before advertising are up $28 million or 8%, primarily due to one, investments for growth in sales and technology areas;…

(Operator Instructions). And our first question comes from Richard Repetto from Sandler O'Neil. Please go ahead with your question.

Good morning Fred, good morning Bill, and congrats on the asset gathering, and that's what my first question is on. So the net new assets to be up quarter-over-quarter in a tax disbursement quarter; I looked back, the last four years they’ve been down in the June ending quarter versus the March. I know you’ve done some new things like the online application process, but I guess a little bit more color. Did that overcome the tax disbursement? And could we see an elevated net new asset going forward, because it's been down 10% to 30% in the last four years in this quarter sequentially.

I would say as I tried to point out there. The retail side you definitely see the tax disbursement flows to a lesser extent in the RIA channel, but they definitely did see it in the retail side. And the retail side was able to grow year-over-year, but the big up overall quarter-to-quarter was clearly driven by the institutional side. The institutional channel had a particularly strong quarter and they’ve got very good momentum going into the fourth quarter.

Okay. And then my one follow-up would be, on the buyback last quarter you talked about dividends being the preferential use of excess cash I guess and I thought you said dividends are a blend of dividends and buyback. So can you just enlighten us on like what’s the incremental change? Well, I know the stock was in the 30 range, but anything incrementally to change that strategy to include the buybacks?

What we had seen during the last quarter, the stock had run up into the mid-30s. In fact it just went over 35 and then came back down with some things in the market and so we thought that it was an attractive time to buy shares and we took a long view, that if you look out over time here, the next two or three years most people would expect some movement on interest rates and so we came to the conclusion with that stock pullback of 10% to 15 % and our view on the future buying stock was an attractive thing to do in the current environment. The only reason we didn’t do it last quarter was basically because we were blacked out when that all happened and we couldn't move and as usual, we don't play our hand about what we're going to do. We simply tell you the results and the background, so that's the long and short of it.

Afterwards. But now it seems like you have some more breathing room with TD as well to keep them at that 45% limit, but anyway, congrats on the strong asset gathering quarter.

Right, thanks Rich.

Our next question comes from Alex Blostein from Goldman Sachs. Please go ahead with your question.

Hey, good morning guys. A quick question on the level of retail engagement overall. We’ve seen cash balance as a percentage of total client assets steadily coming down at your firm as well as some of the competitors pretty consistently in the last couple of quarters. Just curious if you guys could get a better sense on retail versus RIA and where those metrics stand between the two channels and how much more room do you think we’ll have further to go in terms of this number continuously coming down, because it feels like we’re at pretty historically low levels already.

Yes, you're right Alex. We are at historically low levels. At least we’re at levels we've seen in the last five to 10 years. I think when you look at this one you’ve got to look at both sides and so for the numerator, so the absolute level of balance growth has been marginal at best, flattish and I’d say what we’re seeing is we continue to gather net new assets and new clients continue to have the same level of cash, which is pretty healthy. So we haven't seen any change in the new clients coming in, but what we are seeing is our existing clients are definitely moving into the market with the improvement in the market and their attitudes. So they're definitely engaged, and in fact one of the things we’ve seen quarter-over-quarter, even though we’ve seen trades come down from $498 to $401, retail logins are essentially flat, and so people are still engaged, but they just haven't been trading as much. But on the client cache we are seeing net buys almost double year-over-year. So there’s no question people have moved into this market and remained relatively bullish based on what they are doing. On the institutional side, I would say the same dynamics, they are even lower and so there's no question that the RIA's have their client’s investments pretty much fully invested here and are keeping very little in cash. So we are definitely seeing and I would say relative to history, the RIA channel is more fully invested than the retail channel on a relative basis, even though retail will normally keep a lot more in cash.

Got you. That’s helpful color, thanks for that. And the second question for you guys, just as we’re beginning to contemplate a hopefully higher interest-rate environment over the next 12 plus months or so, how do you think the IDA strategy may change once you actually move into a higher rate dynamic?

I think the way we look at it and the way we’ve done our asset and liability management, we’re pretty much right where we want to be, and so we would say we’re fully hedged and well-positioned for a rising rate environment. I think as we go into that type of environment, and we all hope we do in the next 12 months, I think we feel like we’re in a good position. What we’ll be watching for is the slope of the curve.

Got it, helpful. Thanks so much.

And our next question comes from Joel Jaffrey from KBW. Please go ahead with your question.

Good morning guys.

Hey, Joel.

Hi, Joel.

Just to follow-up a little bit on one of Alex's questions, it just seems like there's just a bit of a disconnect between the bullish sentiment that seems to be indicated by your investor index versus some of the trading activity that’s gone on. I mean is there something you see that could get people back into the market in terms of trick (ph) activity or is this more of a shift into more sort of a free style product environment?

I think the answer to that one is pretty simple. I think the people are bullish based on what they are actually doing, and the markets are at record highs. It's not obvious what to do, where else to go, but equity is an option for a lot of our clients. I think the thing that’s missing right now and has changed significantly from last quarter to this quarter is volatility, and so it's hard to believe. When you think about it Joel you've got a situation in Russia and Ukraine, you've got the Israeli, Palestinian and then you have Syria and Iraq, and a lot of geopolitical stuff going on and we are seeing no volatility or very low volatility, and if someone would have told me about a year ago, I want to see that, I wouldn't have believed them. But I think the thing that will be the catalyst to trading here is whether we see increased volatility or not.

Okay, great. And then just lastly, I appreciate the disclosure this quarter on the payment for order flow, but I wanted to ask you, just a question on some of the recent testimony that we’ve seen coming from some of the hearings, it’s kind of indicated that the practices of online broker activity isn’t necessarily consistent with best execution. I mean I think there was one of the people testifying, there was a professor at Notre Dame that basically said that you have a 25% less chance of being executed based on some of these practices. I was just wondering if you could give us your thoughts on this and anything else relevant to this topic.

Okay, thanks Joel. I mean to be honest, I'm a bit surprised at how much airtime this whole topic is getting and for a couple of reasons. First off, the professor’s report is a draft report; it's not even a final report. So for something to get so much coverage when it’s in draft form is a bit of a surprise. And he does emphasize that it may be happening, he doesn't say it is happening, and I’ll come back to that in the second. Second, the focus of his report is on non-marketable limit orders. Non-marketable equity limit orders and that represents about 12% of our trades and a lot of people have sort of implied it across all of our trades, which is incorrect. And the point that the paper is making and it was made at the hearing is that it’s based on their analysis, we and other brokers may be prioritizing rebates over best execution as you said. And I suggest then, because this is non-marketable limit orders, we may be missing out on trade executions we could have gotten if we were more focused on best execution. Now I thought about this a fair bit and so let me make a few points. First off, as I said last quarter, we take best execution and our best execution responsibility seriously and focus on it first and foremost. Unless a market destination or venue meets our criteria for best execution, they don't even get a second look. And after and only after we've satisfied best execution do we minimize trading cost and/or optimize revenue sharing. The second point, the underlying economic logic in the paper we find wanting or flawed, suggests that we’re focused on maximizing rebates so much that we may be missing out on…

Great, thanks. I appreciate the color.

Thanks Joel.

Our next question comes from Alex Kramm from UBS. Please go ahead with your question.

Good morning. Just coming back to the expenses for second, I think you give a decent amount of color, but I think the range this quarter is a little bit wider than usual, and also you said some of the professional fees were somewhat one time. Maybe you can give a little more color on why they were one time, and what's going to be the delta in the coming quarter, but what’s going to drive the difference between 390 or 400?

Yes, I think that – well, first of all the things in the professional services that were unusual this quarter were pretty much – we did some consulting work on a few projects that were one-time in nature, principally in advertising and in some technology that we know are not going to repeat next quarter. So that would be the nature of those types of expenses that are going to hit or that hit last quarter, but won't repeat. Going into the 390 to 400 this quarter, I mean there's a lot of variability relative to incentive compensation and depending upon where we are in terms of both, earnings-per-share and net new assets, so that’s a variable. The order mixes that we have to determine whether or not the fees and the options clearing court were from the singly listed options etc. going to occur again in the levels that they are at this quarter. So those are a few of the really variable costs that can hit in any one particular quarter. Those would be probably the two prime examples for you Alex.

Okay, great. And then just secondly, the net new assets, sorry not the net new assets, but the fee-based assets, these continue to pick up nicely here, and I think surprised again this quarter. So maybe if you can just give a little bit more color on, you give some items, like some of the products that are selling well I guess, but what is driving that higher and ultimately giving what you're seeing, what your clients are doing and what products they are choosing to invest in as you guys seize on. Like where could this actually go over time?

We hope continuously higher. We love to grow that particular revenue line by somewhere between 15% and 25% a year, through a combination of just continued selling and improved market. The advantage of that line is basically not only do you get the results from your organic growth; you also get the lift from the market. So keep in mind, year-over-year you’ve had a decent lift in the market and that helps quite a bit. But we focus very much on annuitizing assets today in half of the last – for three or four years, and so we've definitely got momentum to it. It really comes down to you know, we continue to broaden out the Amerivest offering to basically meet needs as we see them in the market. An example would be the Managed Risk Portfolio. So we're clearly seeing demand for people that want exposure to equity, but have an aversion to risk and are worried about fixed income and that’s the perfect product for them. So I think you have to continue to evolve and add different solutions to meet their needs. We are also finding that in this market, which is not surprising given where it’s at and what we've been through the last five, 10 years, that people want advice and guidance. So there’s a good appetite for it and there’s good appetite for AdvisorDirect, which continues to do very, very well. And then thirdly, anybody that thinks mutual funds are going away and everything’s shifting to ETFs, but there’s some of that, but mutual funds are still in demand and we continue to work at making sure we are getting our fair share of the shareholder services for the work that we do for the various mutual fund platforms. So it's really all three. In fact, we've had comments from some of our investors that run mutual funds about us demanding that we raise our shareholder services fees. So it really is all three of those.

So, I'm sorry if I misunderstood a little bit, but the fee rate itself, I mean is that, if I hear your question, it’s probably the some of the Amerivest products are growing faster than traditional mutual funds or why is that rate picking up?

I would say Amerivest is growing faster than some of the other lower margin categories.

Okay, very good. Thank you.

Thank you, Alex.

Our next question comes from Michael Carrier from Bank of America Merrill Lynch. Please go ahead with you question.

Thanks guys. Hey Bill, may be first, just on the expense guidance, you gave it without the advertising. I guess just given the seasonality in the period, just given what we’re seeing on the trading side, any color on that? And then just given the tax season, on the client cash, was there any impact in the quarter that either taxes were bigger or less than normal that might have caused that client cash level to be a little lighter than what you're typically see?

From personal experience I can tell you that yes, the tax season was a little worser than last year, so from the Gerber family yes, and I think that was probably repeated by a lot of people during the June quarter, April 15 was a sad day. But on the ad spend for the quarter and I can get into more color on that if you want Mike, but on the ad spend, we are looking at just in the 250 range for the year and so we’ll be plus or minus a little bit but 250; that’s kind of what our budget is. So it should come down to your point in the fourth quarter from the level of even the third quarter.

Okay, that's helpful. And then Fred, you gave I think stats from McKinsey, just in terms of the long-term growth, whether it's online brokers or the RIAs and you guys are well-positioned on that, and is benefits kind of the industry growth rate. But your growth rate has obviously been stronger and part of that is growing off of a smaller base, but your base is a lot bigger now. So when you think about whether it's on the activity side with derivatives, mobile, you've done well there. On the net new assets side, whether it's Amerivest, those things are kind of in the pipe. I guess when you look at the outlook, and then relative to the industry growth rate, do you feel like you still have products and initiatives in place to be surpassing the industry growth rate and even if there are some of those, just what would you point to?

Well, we certainly, our objectives are clearly designed to basically beat the industry growth rates, and we’ve been fortunate we've done very well over the last five years and hopefully through six years. I’d say, when you think about it (a) I think you've got to be lined with the growth trends and I think the RIA channel is clearly the fastest growing channel in Wealth Management today, and I think we’ve done a great job at leveraging, innovative in different technology, and is being met with open arms, and some of our peers will catch up with that, and in fact that probably all of them will redesign their technology to make sure they meet that competitive advantage that we’ve had, so it won't last forever. Second, I do believe as we look to the future, it gets harder, the bigger you get. I would acknowledge that, and every year we tell you, this is probably the year, we’ll probably be in the mid-to high, 7%, 8%, 9% growth rate, and every year it looks more daunting, but every year the management team seems to find a way. And I would say as we look into the future today, what we are definitely more focused on is we do believe that we’re going through another big change in technology, whether it’s social media, whether it’s mobile, whether it’s data and analytics, those types of things. There's definitely quite a change going on and when you look at the mobile growth trends its, we haven't seen those kinds of growth trends in a long time. So there is definitely lots changing and we continue to invest heavily into those areas and learn our way in to how do we use it to our advantage. So we are definitely focused on where we see all of the growth going and where we see all the change and where there is change there’s opportunity, and the key is making sure that as you invest in to those things, making sure you're monetizing or taking advantage of them. You're not just doing them and not getting a lift for them, and so far we’ve been able to do that. So I would say we’ll continue to beat the industry growth rates, but whether we can keep double digit up into the future I think is going to get harder and harder.

Okay, thank you guys.

Thanks Mike.

Our next question comes from Kenneth Hill form Barclays. Please go ahead with your question.

Hey, thanks. Good morning guys. Just to follow-up on the technology side, you guys just spoke to on that last question. Last month you hosted your Veo Open Access Tech Summit, where you meet with some of the developers for the RIA Tech Partners. So I'm just kind of curious, when you talk to the RIA's and you collaborate with the developers, what are the things you are kind of hearing from them and where does your focus go? Is it more enhancing what’s going to attract clients or more RIA's to the platform or additional I guess wallet share from the client?

We continue to focus on – we look at a couple of things. What technologies are they using? And when we see a good mass of advisors that are using certain technologies, we try to make sure they get in the Veo and to the Veo Open Access model, and the vendors are usually very happy to do that, and wind up being advocates for us as well. So we definitely look for adoption rates first. Second, we look for what are they really – what’s their frustrations or what are the things getting in the way from them doing more business and the more you talk to them, you listen to little things and you have to listen carefully. But for example, iRebal. People that are bigger at RIAs and we definitely have moved up and are doing bigger RIAs today. In terms of using more sophisticated strategies, whether it's the iRebal rebalancing software, which if you talk to bigger RIA's is very painful for them when they make their adjustments to their asset allocations or investment portfolios. The iRebalancing software is very attractive to them. It saves them a fair bit of time and it’s much easier than having to do it account by account. And so the things that make their life easier and convince them that we’re on their side and we are trying to help them succeed, and when they succeed, we succeed, are the things that really do resonate with the RIA community.

Okay, and my follow-up here is, you guys launched the Amerivest managed risk portfolio and I can appreciate its probably very early days, but just kind of wonder if you had any early up-tick you can speak to on that or what real kind of I guess client demographic that’s going after or what kind of hole you’re looking to fill in the market right now.

It’s doing quite well. It's still very early, but it's doing very well, so we definitely saw the need, but I would say a lot of times that particular metric is going to be baby boomers. They want to continue to invest, but are getting to the point in their life where they have a little bit higher aversion to risk.

Okay, thanks very much.

Thanks Ken.

Our next question comes from Bill Katz from Citi. Please go have with your question.

Okay, thank you very much for taking the questions. Just to come back to from a very big picture perspective, the intellect fundamentals are really quite good, just asset gathering and then dart activity if you look on a longer term basis. Sort of step back, you look at your margin, look year-on-year, it's about flattish if you're just back for the professional service fee one time in this quarter. Forget a year ago, often being unusuals there. So ex-rates, putting rates aside for a second, as you think about the business on a go forward basis, are we at peak profitability or is there still an opportunity to drive better profits, and I appreciate you’re at 47% EBITDA margin as a starting point.

We still think there’s room there. We would never give up on that. I think anybody running a business today will try to drive a wedge between revenue growth and expense growth and you may at times invest for the long term, because I think you have to have that momentum. Like you can't start the year and say, well now I’m going to focus on revenue growth. You have to have a focus on the things that drive revenue growth day in and day out, to drive that. But we still think there’s some upside there. But I have said in the past and I haven't changed my view, that once you start to get over 50% pretax margins, EBITDA margins would be higher. That I think you start to get into a balance that you got to ask yourself, should you be investing more or should you be harvesting for higher margins? And I struggle with that, because when you think about things like the McKinsey report and what not, when you get to that level of profitability and margin, particularly when you are ignoring it, you have the upside you see in interest rates and what could happen to revenue mix and margins, you basically would say, for the long-term interest of my shareholders, we should be investing here as opposed to maximizing pretax margins, so we do think there’s still some up.

Okay. That's helpful, thank you. And the second question is more a two-parter. The first part is, where do think you are in terms of opportunity set so to cross sell options trading. Obviously it continues to do very nicely. And the second part of that; within your disclosure about routing, I think roughly half of that comes from your options business. Is there any regulatory stance or any scrutiny around that element of the routing?

To your last point, we haven't as of date, but we wouldn't preclude I think the SEC. The original talk that Mary Jo White gave was focused on the equity market. Her subsequent talk at the Economic Club of New York expanded into fixed income. And in that talk she definitely talked about the different asset classes and making sure we take a broad perspective, so that wouldn't surprise me, but we haven't seen anything specific with respect to the option world at this point. Does that answer your question or did I miss something?

Thanks for taking all the questions, but the first part of it was just, where do you think you are in terms of opportunity set to drive options growth, derivatives growth within the overall trading mix?

Every year I always say I think we've saturated that, but the thing with options and futures, if you go into options, you’re going to want futures and you need both that, and so it really is the combination, but option is a predominant part of that. And the advantage of them is as we've said before, it’s because they expire people have to retrace it as a greater annuitization aspects to it. It has a richer commission per trade and then number three is option and future traders tend to be able to trade at almost any market, which equity traders can’t, and that was one of the main strategic reasons we pushed down that path. So you will see basically that in markets where trading is coming off or what not, we would expect the mix to shift towards derivatives, because they can trade in those types of markets, whereas an equity trader will pause and wait, even though they are checking their accounts every day. But I would say, we still have some runway, but I would expect it to continue to grow over time as a percentage of our trade volume, but I think that growth rate is going to slow here.

Thank you for taking all my questions.

And I'm sure Steve Quirk going to say you're wrong.

Our next question comes from Steven Chubak form Nomura. Please go ahead with your question.

Hi, good morning. I was hoping you could clarify for us whether you saw any benefit on the trading commission side, specifically from early June relating to the Apple stock split.

Just a sec. You give me one sec, because I haven’t looked at this yet. I got Bill Murray to answer, because its one I wasn’t ready for, so...

It’s a little bit of an analysis and what they saw is a pop initially. The equity still came back to a normal trading pattern, but the option contracts have remained high, so we do see a little bit of lift on the option side.

But not on the equity side.

The equity side came back.

Okay, and the expectation is that that strength is going to persist going forward or is it just on the options side specifically. I know you talked about equity seeing that initial pop, but it sounds like that, the resilience in terms of options contracts traded is actually persisted.

Yes, that's right and we would expect that to continue. We have no reason to think that won't continue. Apple is the largest holding of all of our clients and the most frequently traded symbol, so we have no reason to think it will change and we have a bias or our clients have a bias, at least in these markets towards technology.

No, I understood, and then just one follow-up relating to the expense guidance that you guys have given. I was hoping you could confirm how much of the increase in the guidance was attributable to the higher clearing cost specifically, just so we could bake that into our model. I derived a rough range of about $15 million to $20 million, but that may be a bit too high.

Again, we are getting the information on that right now, but I thought it was actually a little over $1 million in the quarter. It was the combination of rates, the singular listed options when the OCC rate changed, so probably, again, probably 1 million.

The quarter is to about $4 million to annualized.

Okay. No, that’s perfect. That’s it from me. Thank you for taking my questions.

Our next question comes from Christian Bolu from Credit Suisse. Please go ahead with your question.

Good morning Fred, good morning Bill. Thank you for taking my questions. A longer term question on your expectations for trading volumes; you spoke about the importance of volatility on activity rates. Just curious to get your thoughts on if the current low volatile environment is largely driven by structural of cyclical issues. And then secondly, if we are stuck in this current low volatility environment for an extended period, what are the avenues do you see to help you drive activity rate higher?

So I'm not convinced these are long-term secular trend. I think there is just -- I think we are in an environment where there’s a lot of monetary stimulus around the world in the market. And sooner or later one would assume that that has to start to come out, and whenever that starts to come out, I have a hard time believing we are not going to see volatility, given how much stimulus we've had and the longer-term nature of it, and it's also related to cost asset classes. So there's no question and I think the volatility in one market does have some dependency on another market and if the yield curve starts to steepen. There’s a lot of stuff going on, whether its global flows involving China and U.S. Treasuries and elongated U.S. treasuries or Fed stimulus that eventually starts to come out. I have to believe that my own experience in this business is that that’s going to cause some bumpiness and I would expect activity levels to pick up over time, but it’s highly dependent on when the Fed’s, the various Federal Reserve type institutions around the world start to fall back a bit and the global flow start to adjust; that's the first point. The things that we’ve been focused on to improve activity rates, in mobile adoption we've definitely seen people more engaged if they have mobile and will trade more in certain types of markets, and there’s people that have adopted options in futures who will actually trade more and so that's why we are pushing down those two venues and continue to invest in it. And we continue to work with different partners basically to help with content, because there's definitely a craving for people that want to trade. Can I want something that helps me understand how to think about it, and to form various thesis, and so we are definitely seeing it, some mobile options and futures, and then content would be the three areas we’ll be focused on, where we would say driving activity rates and trading levels.

That’s great color. And I guess I can summarize by saying, you believe higher rates are probably better for activity rates just generally speaking.

I agree, yes.

Okay, that’s helpful. And then second question really is around just the regulatory environment for your RIA business. So with regards to the amortization, the amortization of investment advisory and broker-dealer regulator, it feels like the RIA industry is pushing for a user fee to fund more frequent audits by the SEC rather than having as SRO or FINRA regulation. I’d be curious to get your latest thoughts of where you see this regulations shaking out? And secondly as you speak to your advisors on the platform, any concerns they have regarding the potential for additional compliance burden?

Yes, there's no question that the RIA community is concerned about increased compliance burden and audits and particularly the smaller advisors, because it's expensive for them. And then I’d say, I think there’s a prevailing wisdom or feeling sorry is probably a better word that they would prefer to be directly regulated as fiduciaries through the SEC than through FINRA, which what they view is we used to live in that world, many of them, and they will have a leaning towards the broker-dealers standard versus the fiduciaries standard, they made that shift and so they definitely don't want to be seen as broker-dealers and be regulated as broker-dealers. They prefer to be regulated as fiduciaries in all the inherent differences in that model. This has been going on for quite a while. I'm not sure when any resolution is going to come, but they are definitely seeing an increase in SEC audits and SEC audit questionnaires, and I definitely heard that at our elite conference, last couple of months ago.

Before we go any further, let me correct something that’s in the prior answer or the prior caller. Instead of $1 million, it actually went up $2.5 million in the quarter. So that was the impact sequentially, so that would be a $10 million annual run rate, assuming that volumes were the same, but I just wanted to correct it. I said one, it was actually $2.5 million in the quarter, so that’s the right information. Singly listed options and from the OCC fee change, which was effective April 1.

Okay. Sorry Christian, do you have another question?

I just want to follow-up on the compliance point. Do you think there will be any impact in terms of the growth rate of the industry, just given this additional compliance burden?

The long and short of it is, no, depending on how the standards work out. But I would continue to believe that the trend towards independence is not going to slow down, because there is increased compliance burden in the industry. There is other reasons why people go independent and it may cause people to think a bit differently and to have increased costs, but I don't see the trend changes per se.

Great. Thank you very much.

Our next question comes from Patrick O'Shaughnessy from Raymond James. Please go ahead with your question.

Hey, good morning guys.

Hey Patrick.

Just one for me; a question on pricing. So now that we have your order routing revenue, if we can back that out of your trading revenue, you can get to what your trading commissions are, and as I’m calculating, it looks like your commissions per trade dropped to $9.69 this quarter from $10.06 the quarter ago. So assuming my math is right, can you just talk about the trend there? Is it a customer mix issue? Is it a product mix issue and just overall and what sort of pricing trends are you seeing right now?

Your numbers are correct Patrick. So it is a little bit – you also have the promotional, the negative from promotional trades that we give in there too, so that is embedded in there. So that one we of course, we just don't disclose, but any variability in their will also move the needle, promotional coupons of course would be in the negative. But you do have like we all do, negotiated rates in there and when you have your more active clients trading, it would move the rate per trade down.

The promotional things should be higher following your busiest time of the year. You're going to open most of your new accounts in the March quarter. So it doesn't surprise me a bit when I think about it.

All right, understood. Thank you.

Our next question comes from Chris Harris from Wells Fargo. Pease go ahead with your question.

Thanks guys.

Hey Chris.

So we've talked about customer cash balance as a percent of client assets really coming down as investors engage and get more bullish, but one thing that kind of sticks out to us is your margin balances and so those are definitely growing, but when you look at kind of margin as a percent of client assets, it’s still relatively low compared to where it was maybe a few years ago and especially going back to the prior peaks last cycle. So just wondering if guys can maybe explain that dynamic a little bit, why maybe investors aren’t borrowing as much as they used to and may be related to that, could that potentially be a pretty significant source of upside if the current trends continue?

I think on a per client basis I would agree. We tend to have more margin to your point, but the growth in the RIA’s that tend not to use as much margin is one of the main factors that I would point to. So I think that we are happy with the margin balances and where they are sitting. They are still fairly in a tight range or closer to the range that we've had in the past, but as the mix changes to more in the RIA sector, I think that the historical data will be less and less relevant so to speak.

Okay, so kind of a customer mix issue if you will. Okay, a really quick follow-up on the capital return. I appreciate your comments already on that. It still seems like you guys are going to have plenty of cash. It's really a high-quality problem to have. Should we budget for you guys to do another special dividend in December or is that option still being discussed?

Well, you know what, I don't want to answer that question to be honest with you, because we got to discuss that with our Board. We’ll discuss that with them later this week, so I don't want to play my hand here until I've had a discussion with my Board, who has to approve anything were going to do on that front.

Okay, fair enough. Thanks guys.

Okay Chris.

And our final question from today comes from Chris Shutler from William Blair. Please go ahead with your question.

Hey guys, thanks for squeezing me in here. Just one question, the NNA strength on the RIA side of the business, just curious what channels you’re seeing most of that strength in. So our autos, IBD res wire house, regional’s, etcetera and the reason I ask is I heard from at least one of your competitors that wire houses become a bigger source of recruiting this year. Thanks.

I would've said a year ago it was the regionals, but we definitely have picked up with the wire houses more recently, and I think we are definitely seeing a trend to picking up bigger advisors now. So normally when you see that you will see a shift back into the wire houses, but we are getting a higher average size advisor in the last couple of quarters than we’ve seen historically. I think that's all because of things we've done with iRebal, the strategy desk, the technology, all those things have allowed us to move up to get bigger advisors than we have asked historically.

Makes sense. Thanks a lot.

And at this time I’d like to turn the conference call back over to Mr. Tomczyk for any closing remarks.

Well, thanks everyone. We had a solid quarter. The asset gathering was a very strong quarter for us, particularly when you think about the tax payments. We’ve got very good momentum with $40 billion year-to-date. The management team remains very focused here, finishing out the year strongly, while making sure we reposition ourselves and adjust here to make sure we got off to a good start for 2015, and we’ll talk to you in October. Take care. Bye-bye.

Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending. You may now disconnect your telephone lines.