KM Research
Long/short equity

TD Ameritrade's Exposure To HFT Frontrunning Is A Class Action Nightmare Waiting To Happen

Barron's recently wrote a bullish piece on TD Ameritrade (NASDAQ:AMTD), the Omaha-based discount broker, alleging the shares are oversold and there is substantial upside from NIM (Net Interest Margin) growth with the advent of rising rates. This is a thesis that may has been popularized for the big discount brokers Charles Schwab (NYSE:SCHW) and E-Trade (ETFC) as they sit on large deposits of client assets. However, Barron's errs in their analysis, as I will argue, rate increases will take time to hit EPS. Also, this EPS boon is likely already priced in, as the discount BDs trade with PEs north of 25, well above their brokerage peers. However, and far more importantly, AMTD has...

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