"Money markets are Ameritrade's biggest revenue source," according to stock performance analysis prepared by the 'Trefis Team' and posted to Nasdaq.com on 2/11.  [C-I Note:  Frankly, we're surprised by the statement, and we thought you might find it interesting, as well.]  Here's the analysis.

    Understanding Money Market Deposit Accounts.   A money market deposit account ("MMDA") is like a savings bank account where clients deposit money and in earn a slightly higher interest rate on it.  Account holders can typically make a few transactions a month that are free and are governed by a slightly different set regulations and rules.

MMDAs became a source of revenue for Ameritrade in 2006 resulting from an agreement with TD Bank USA.  This agreement was inked as a part of Ameritrade's acquisition of TD Waterhouse in January 2006.  Prior to 2006, interest revenues for Ameritrade were a significantly smaller part of the total revenues and included interest earned on the cash and securities that clients deposit with Ameritrade in order to trade online.

The net yield for Ameritrade from an MMDA was as high as 4% in early 2008, before it fell to under 2% in 2009.  We believe that the interest rate will gradually increase over the years to reach the highs it achieved in the pre-recessionary years.  Moreover, the increasing popularity of an MMDA over normal savings account among clients due to the higher interest offered is also a significant draw for Ameritrade.

In 2008-2010, Ameritrade migrated client cash held in client credit balances and money market mutual funds into money market account offerings.  The total balance in these money market accounts with Ameritrade almost doubled each year during this time period. Going forward, we expect the balance in these accounts to  grow by at least 5% annually.

To access the analysis, go to:   [Nasdaq.com, 2/11]