Good day, everyone, and welcome to the TD Ameritrade Holding Corporation's September Quarter Earnings Results Conference Call. This call is being recorded. With us today from the company is President and Chief Executive Officer, Tim Hockey; and Chief Financial Officer, Steve Boyle. An audio file containing Mr. Hockey's and Mr. Boyle's comments on the quarter and fiscal 2018 can be found on the company's corporate Web site, amtd.com, under Investor Relations. This call is intended to address related questions from investors and analysts. Questions from reporters can be directed to the company's media relations team, or you can follow their Twitter handle @TDAmeritradePR, which will be live tweeting this morning's call. [Operator Instructions] Let me take a moment to compile the questions.

Your first question comes from the line of Devin Ryan from JMP Securities. Please go ahead.

Hey. Great. Good morning, guys.

Good morning.

Good morning.

I guess, first question here, I'm getting this question after last evening, just trying to think about the operating leverage potential here in a scenario where maybe the revenue backdrop is quite a better, you guys gave kind of a low-end of the revenue range, but to the extent revenues maybe come in with the interest rate curve that's currently out there and don't turn down as much as the kind of low-end forecast. How should we think about operating leverage potential as we think about next year?

Yes. Thanks, Devin. That's a really good question. We've gotten a lot of questions on our new guidance. Maybe I'll just give a little bit of context on what we were trying to accomplish. And then I'll answer your question. So, our whole business is that you all are going to be creating your own revenue ranges in future as you look forward you will use your interest rate scenarios and your trade scenarios to come up with some of the major inputs here. That's one of the reasons why we gave all the additional detail on the maturities on the BDAs we will able to have a more precise model and some of that stuff. The reason we gave the low-end of the range was really just to frame up the way that we thought about expenses. So, we want to be positive operating leverage over a cycle. We think that with all the tailwinds that we have with interest rates, we ought to be at least 200 basis points positive operating leverage coming into this year, so that sort of set what our expense range are. Our expenses tend not to be as volatile as our revenue. So we are not able to flex them quite as much. So just to give you for instance see to your point, if you use the forward curve that would pick up about a $100 million off of our base. If you use last year's trades that would pick up about $200 million off our base. If you used the midpoint of our expense range that would get you to about 6% positive operating leverage. So we really view the 2% as a minimum that we are going to manage to, and we would expect if we continue very strong numbers like we have seen so far this quarter that the actual positive operating leverage look strong.

Again just to add a little bit more, Devin, the - from my point of view, over the cycle as Steve said given the volatility in our revenue number, we just want to make sure that the team is investing when times are good. So the opportunity when we have revenue tailwinds and good strong market fundamentals, high trading levels and you have seen our activity so far this quarter, we are not flat to last year. We are up 20% in terms of trading level. So when you see that type of revenue, you want to be able to reinvest back in your business for further growth. On the other hand, there is just a share capacity level that the company can absorb in terms of growth rate of expenses. You just don't create net new subject matter experts to build your next new capability. And so you need to have an absolute limit in that growth rate even with revenues that run away from you. So let's hope we have great high revenue year starting off to be in great shape. But we wanted to give you the low-end of our revenue and then how we run the place over the long-term.

Got it. Very helpful, thank you. And just then my follow-up is on the competitive environment and the conversation around the outlook for commission pricing. I think that's clearly been one factor weighing in the space. And so as we think about the model today and clearly you are rolling lot in new capabilities and products to differentiate Ameritrade, but how are you thinking about M&A either to gain more scale than you currently have and maybe economic benefit? Or even M&A or other actions that would accelerate the focus away from trading or from commissions?

You know our standard answer, well, we are constantly observing the marketplace and we'll take advantage of opportunities that still a need for us and that can be a scale need or it could be a capability need. Or, it could be a diversification need. So, we continue to look. We don't have any specific areas we are saying, "Hey, look, we need to target that right now." And we are quite comfortable with our position in the competitive environment. And as you say, we are reinvesting those excess revenues, if you will, back to build out the capabilities for our future.

Okay, great, thank you.

Your next question comes from the line of Rich Repetto from Sandler O'Neill. Please go ahead.

Yes, good morning, Tim, good morning, Steve. And I guess my question will be on the BDA balances and I guess it's more for Steve. But end of the year, the end period was $112.5 billion lower than the average. So I guess the question is do you expect to grow BDA balances next year. And I guess little bit deeper is do you think that we have reached a floor level of cash as a percentage of client assets, so when you see the next rate hike, you won't see an outflow of cash? Or how are you thinking about overall BDA balance growth?

Yes, great question, Rich. Thanks. So I think there is really two big trends happening in the whole industry. So one is we have seen very strong client engagement. We have seen very strong buying over the last several quarters. And so, it feels like our clients are pretty fully invested here. We have also seen a pretty significant increase in rates over the last couple years. And we are seeing a bit of clients who have excess cash in their accounts. We don't need it for their day-to-day operating who are now moving to get better yields on those funds. I think both of those cycles are reasonable - we are reasonably far into the cycle. So, we think that should have a lasting impact over time. And we do expect to see strong growth as we move into the future and accounts which is going to mitigate that impact. So, to your point, I don't think we would expect to see a significant declines or even meaningful declines in our BDA balances. But these are things that I know you are everybody is watching pretty closely.

Got it. Okay, thank you.

Another thing I would mentioned, Rich, is just we have a natural offset in our earnings that as our cash balances we see the strong buying activity, our cash balances tend to go down, but we tend to see very strong offsetting increases in margin balances. They are very positive spread. So that's obviously helped our [indiscernible] quite a bit. And if we saw - the offset if we saw engagement deteriorate or [technical difficulty] expect our cash would pop back up.

Understood, okay. And then my follow-up question and I wasn't ask this, but Tim, you did make some comments on M&A. So, it's a theoretical question. Do you think are able to truly able ascertain what someone will pay for an asset without listening to a bid or without a formal competitive process?

Great question, Rich. And I won't comment on a hypothetical. So why don't I give you a mulligan and you can ask another one.

All right, fair enough. The question would be on the interest rate sensitivity, you got 75 - excuse me %70 million to $95 million of upside from the next rate hike. I guess, Steve, could you just give us a little feel on the breakup between margin lending. You know, I know you are going to say exactly, but is there a portion of that - a chunk of that, what percentage of the chunk of that sensitivity goes to increase - taking out price increase from margin lending?

Yes. So think we have pretty simplified assumption in there, Rich. So that's assuming no change in BDA balances and no really mix shift in margin. And it would assume the 15% to 25% BDAs in the that we have fully baked into margin change as well.

Okay, that's helpful. Thank you very much.

Yes, 15% to 20% on the BDAs, sorry about that.

Your next question comes from the line of Mike Carrier from Bank of America Merrill Lynch. Please go ahead.

All right. Good morning. Thanks guys. And the first one, just on the low-end the revenue based on the 575, so Steve, I think you gave some of the assumptions in the terms of the rate outlook, the [indiscernible] down 10% in the commission pressure, because you didn't give like the margin balances or the BDA obviously you don't want to predict that in the environment. But just wanted to get some context in different environments how we should be expecting whether it's a cash balances, the margin, even the fee revenues to shift around? I guess more importantly has anything changed like structurally given whether it's the mix of business some of the products that are offered that would maybe not have like the offsetting factors be as relevant as in the past? Meaning what you just said in the last question in terms of margin up, cash down or cash up, margin down?

Yes. So I think we expect the business to behave relatively similarly to what it has in the past. We are growing our institutional business lot faster than our retail business so that drives a little bit of a consistent mix shift. But beyond that to the extent we stay in a strong involvement like we have been in, I think you will continue to see some modest pressure on the BDA that I mentioned before that will be offset by growth and accounts, good margin balances, so that should continue to see strong NII growth. And depending on the scenario that you are modeling, you could see those things move in opposite directions, but we wouldn't expect the fundamental mechanics of the business to be any different next year.

Okay, thanks. And then, just as a follow-up, given that the level of competition has picked up, I just wanted to maybe focus on some of the things that - some of the tools that you guys have to maybe offset any potential move in the future, so the one would be maybe the pace of buybacks, you mentioned up to 40% but like how opportunistic will that be versus very consistent, and then I guess on some of the investments and technology, AI automation, just where some of the - maybe the significant, like potential opportunities over time for Ameritrade theater become more efficient or redirect those resources elsewhere?

Okay, great. So, why don't Tim start on the expenses, and then I'll come back.

Yes, just in terms of a spend on the technology side, I absolutely feel like we are at a bit of an interesting time in our industry, and that the investments you can make and making your business more efficient have the chorally effect of making your client experience even better. And so, there are significant emerging technologies we - everybody likes to talk about, and the AI machine learning bought, voice recognition, many of which we launched more that we are launching imminently that actually can help deliver better job of a client experience, and at the same time take cost out. So I think that's an - it's quite a significant opportunity for us in the near-term, which is one of the reasons why we want the opportunity to reinvest back, and more and more as our revenue growth is strong, but still keeping inside that operating leverage framework.

Yes, and I guess just to add on that, we are targeting to be you know if you adjust for our business mix, best-in-class expense on client assets over time and so that's a goal that we are shooting towards we are investing to that right now. On your buyback question, we've got a number of questions on the level of the buybacks and I think you don't make sense. We have a very strong with our capital like model; our Q4 return on tangible equity was 85%, so we generate a lot of free cash flow. So, the 70% assumes that will have the opportunity to build up our capital levels a little bit. And I think to extent that we stay in a very benign environment and we don't have other uses for that capital. And we don't see that the explosive kind of margin growth that we've seen that people have the opportunity to potentially up that guidance in the future.

Okay, thanks a lot.

Your next question comes from the line of Chris Harris from Wells Fargo. Please go ahead.

Thanks. Hi, guys. My understanding is the operating expense guide for next year is on a GAAP basis. And so, it appears that on a non-GAAP basis, you guys are forecasting kind of flattish here because you did about $2.87 billion and non-GAAP operating expense in fiscal '18. So number one, I guess the first question is, does that sound correct? And then secondly, if it is, shouldn't we be assuming a lot more operating leverage than 200 basis points on a non-GAAP basis?

Yes. So, Chris, to your basic question, it is a GAAP now number. And our expectation is that the amortization of intangibles next year will be about $1205 million. So you can get to the non-GAAP number pretty easily. And then, I think we actually - you don't have a roll forward in the fact sheet, but essentially, I think maybe you're what we do, when we talk about positive operating average as we go back to sort of a core number for last year, which takes out the realized synergies and so I think if you adjust for that, you'll see that there is modest expense growth next year.

I see. Got it, thank you.

Your next question comes from the line of Bill Katz from Citigroup. Please go ahead.

Okay. Thank you very much for taking the questions this morning. So just contact to some of the inputs to the revenue assumptions for this year, you mentioned sort of the tradeoff between margin balances and cash balances, and it seems very clear, how we think about the beta on margin balances and surprise, so the ability to sort of pass that through given your client base. I don't know if you do pricing details on that?

Yes, sure, Bill. Thanks. So we have been able to raise our margin rates pretty consistently here with the each move. And so that's been a positive, I think the competitors have been pretty rational on margin rates and the only thing that we see we saw this quarter is we tend to see more growth in our very high balance accounts which either are at high tiers or negotiated. So sometimes, the yield doesn't go up the whole 25 basis points. But and we are seeing on the rack rate customers who use margin more occasionally that there hasn't been a lot of price pressure there. So I think you'll continue to see similar trends in the future.

Okay. Thank you.

Your next question comes from the line of Christian Bolu from Bernstein. Please go ahead.

Good morning, Steve. Good morning, Tim. I guess just on the RIA business Tim, how do you think about the value of that business? If I think about the three monetization engines, what are its trading commissions, client cash, our revenue share for mutual funds all seem to be in some sort of structural decline, so are there other opportunities to better monetize those assets, given the vast majority of your growth comes from that channel.

Well, Chris I could say you could look at pretty much any revenue stream certainly in wealth management and arguably in business today and it's under pressure again because of the disruptive technologies that are in place to new entrance, et cetera. So when it comes to the RIA business in particular, actually we're quite bullish on that business. It is no question macro secular trend and has been for many years, fastest growing wealth channel, et cetera. Yes, the revenue levels per dollar of asset are relatively low. But it's certainly scaled up nicely. We are at scale and we have a very nice positive operating leverage and we will continue to grow. But to your point, we'll continue to see whether your opportunities for monetization of those assets. But right now, we are quite comfortable with our growth rate and where we are going.

Yes. And we have been able to do some things over time that we've talked about. So we've - we invigorated our ETF market center, we are - we've added a model market center. So these opportunities, I think to get paid for just distribution and our scale as well as some of the traditional methods.

Okay. And then, just a quick follow-up from me on I guess Tim very focused on new technologies, so I think I've asked this before, but on crypto currencies, I guess fidelity is now looking to enter the space with a trillion custodial product, so maybe updated thoughts on kind of where you guys stand on that?

Yes, we've just announced about a month or so ago, a small investment in ErisX and you will change in crypto, our general view is, it is very much a watching brief for everybody. There is clearly a lot of retail and institutional and global interest in it, but at the same time, what we've seen over the last year or so has been a lot of shady or entrance into the space as well. So one of the things we like about our ErisX partnership is, it's to start to try to address clients' interest in the space but in a highly regulated manner, so that we can do it appropriately for our clients. Having said that, that's the crypto space and of course, like everybody else, I think we are continuing to experiment all sorts of opportunities for our Blockchain technology itself and to often go hand-in-hand. The ErisX Exchange should have products likely rollout later into next year as it gets built out.

Okay. Thank you very much.

Your next question comes from the line as Chris Shutler from William Blair. Please go ahead.

Hey, good morning. So, cash I think it's about 11% of client assets today, can you give us a sense of where the retail percentage sits and where the institutional percentage sits? And then, given that we've been in this low rate environment now for quite some time, how do you really properly gauge where that that cash allocation particularly in the institutional side could bottom?

Yes, so we don't give out those specific numbers. But we are seeing that there's been more pressure on the institutional side on the total and on the client per client. We're seeing a lot of growth there that's offsetting that. So that's a great thing. I think in terms of the - the terms of the bottom, I think we look at the two businesses a little bit differently. I think on the institutional side, there's a certain amount of operational cash that that needs to be in those accounts and so we think that that's sort of the measure of the bottom and it's hard to get an precise number because where we're sort of testing new laws here, but I think that's the concept that we're thinking about. And on the retail side, it's really how much cash do clients need on hand to transact the securities transactions that they want to do and so we think that's going to be a measure of new bottom and those clients tend to be a little bit less sensitive in terms of the absolute amount of cash, they keep in their accounts. So we think that all continue to stay higher than the institutional side. So we do think, as I said before, we're pretty far into these cycles but we're continuing to monitor that, we don't have an absolute prediction where it's going to end up. But just to put color on it, we've been here, we've got had a basically a 10-year bull run, 10 years ago that cash level of the enterprise was 21%. So, 10 points down as a percentage over the last 10 years as the market has increased, so that sorts of give you the range.

All right, thanks guys. And then, with Fidelity rolling out the zero expense ratio in mutual funds, just want to get your thoughts on the effectiveness of that type of thing as marketing strategy and is that something you would consider?

Well, price is always one way to advertise. We've been very clear we think we are going to have a great value proposition for clients based on the client experience, and we're quite comfortable with our own value proposition because price is just one component of it, but zero anything is an interesting marketing proposal, but as it's been said by others, there is always a cost of doing business and it's usually somewhere inside the business model.

Okay, thank you.

Your next question comes from the line of Michael Cyprys from Morgan Stanley. Please go ahead.

Hey, good morning. Thanks for taking the question. Just on the related to the BDA and the securities portfolio and the rising rate environment prepaid flow and duration extends on MBS. Just curious to what extent that's a risk in securities portfolio that you have today on with the fixed rate ladder and just how do you think about broadly managing that sort of extension duration risk?

Yes, we don't have any, we don't have any prepayment risk at all on our balance sheet, so our securities are not mortgage backed, they are treasuries and the BDA doesn't have any prepayment risk either.

Got it, great. Thanks for clarifying. And then just lending products just given the strong growth in margin balances, how are you thinking about opportunity set for broadening out the lending suite a little bit more maybe pledge asset lines. How are you thinking about the growth opportunities there and as it relates to other types of loan lending products relative to your current offerings?

We have it on the institutional side and we've got it on a call an exception basis on the retail side looking to roll out a security back product fairly same.

Great, thank you.

Your next question comes from the line of Kyle Voigt from KBW. Please go ahead.

Hi, thanks for taking my question. Just a follow-up regarding the larger increase in the money market fund balances in the last quarter seems that you've, you've taken a view that you left the investment cash kind of seek those higher yielding instruments and keep betas relatively low in the remaining transactional cash, I guess how do you weigh that versus maybe segmenting the clients more and increasing overall betas and then as my follow-up to that, I guess the strategy here in betas and client segmentation and your view on this deal picking cash or investing cash, is that different than your thinking before the tightening cycle began? Thanks.

Yes, thanks, Kyle. So good question, we view our cash balances mostly operating cash and we realized that there'll be some clients that will opt to move into purchase money funds and that's okay, it's good for the clients. I think it allows us to as you said to keep relatively low pricing on that operational cash, we don't have any need to fund our balance sheet like a bank, so all we're really looking to do is optimize spread income and we feel very comfortable that our current strategy is doing that well, we think if we tried to raise our betas even in the segmented approach as you discussed to keep all those balances that would be having lower spread income.

I would say we did a lot of work to try and really understand the betas of our particular tiered the client cash and data sensitivity and so as a result we just frankly just think we're little smarter this time around in terms of really maximizing the opportunity for beta variances across those tiers.

Thank you.

Your next question comes from the line of Brian Bedell from Deutsche Bank. Please go ahead.

Great, thanks, good morning folks. Maybe just to clear up on the expense side that was the first question, I got yesterday from a lot of investors just on the base that you're calculating the operating leverage from obviously the 2.9 to 3 is the GAAP number. So the midpoint of that operating expense guidance left the 125, intangible amortization is $2.825 billion, the base that you're saying in footnote 3 of $2.8 billion we should be taking the 125 out of that as well which will get you a base expense growth of 6% for the year based on the midpoint, just wanted to verify the 2.8 was correct on the base?

Yes, so remember last quarter we went through and we created sort of a new GAAP operating base level of 2.8 and that's how we used to calculate the jump off.

Yes, that is 2.675 ex the 125 amortization.

That is right.

Right, so 6%, okay, and then just from the operating leverage potential, we could see a situation where you usually have double-digit revenue growth if it ends up being in the mid-teens level because we get let's say very strong trading activity and a favorable rate curve, I guess what is the view of spending going beyond the $3 billion GAAP expenses or you sort of committed to staying in that zone and generating more operating leverage or would you look at that as an opportunity to invest more in growth strategies including advertising?

Yes, so as I said earlier, if we continue to get call it out of the ballpark here that it's shaping to be so far in terms of the initial few weeks of trends, there is an absolute cap in our own minds that is more driven on the organizational capacity to effectively spend. There are only so many initiatives you can spend up. There are so many expert people to work on them and so as much as you'd like to flex out on your expense growth to invest back as appropriate, it would be inappropriate for us to try to grow that fast just for initiative. So yes, we will flex out at around call it 7% growth rate on that number, we're talking about feel like that is probably the operational capacity. On the other hand, I could see that if the market went crazy and our marketing opportunity was such that as we said in the past would be an opportunity to deploy some dollars to get further growth without sort of baking in a run rate of expenses then that is something that that we might want to do. So just want to be a little bit flexible and we think that would be a good growth trade-off, that's sort of how we think about expense growth.

Great, that is great color, thank you.

Your next question comes from the line of Brennan Hawken from UBS. Please go ahead.

Good morning, guys. Thanks for taking the questions. First, I just like to start it seems like investors are really, really concerned about both commission competition and cyclical risks but those seem to have a component of an embedded hedge. I'm curious whether or not you could share your views on this, in your experience how much pricing and commission pressure tends to be cyclical and how much do you see those pressures easing when we see markets roll and this cycle ease back a bit?

Well, there's a few things, we have assumed seen we've got sort of an ongoing 2% to 3% pressure on our commission rates, we see the same step function, flurry of activity that you get every five, seven, 10 years in our particular space in the industry but a lot of that is partly driven by the rising value of cash deposits in a rising rate environment and that eases the pain that one would feel if you were rushing down. I'd say we've long said reducing price from a competitive point of view is really an opportunity to gain market share. So you have to assess when you have these changes especially the step function changes whether market share actually changes. We're very comfortable with our growth rate we had literally 46% growth year-over-year in our high value funded accounts, due to the firm last year. So even with our higher price point on commission rates we're still very attractive in the marketplace and these are absolutely low levels of trading activity historically and so it doesn't seem to be as free trading commission rates historically so it doesn't seem to be too much of an impediment for the activity. So if we saw revenue from cash for example start to abate because interest rates started to go down again if we had a recession I think you would find the industrial System slowdown in terms of competitiveness on other forms of revenue it is a competitive market.

It makes a lot of sense, thanks and then just one quick one here when you see volatility pick up as you seen in October, how quickly do you notice your customer base adjust to cash levels and maybe a corresponding change in margin balances have we have we seen that in October or in the quarter to date or does it take more extended period of volatility to actually see that start to play to them?

Yes, so we see a few things, typically our clients are our buy on the depth there opportunistic and we see strong buying we tend to see it has been in margin balances we actually saw a new record margin balance and at October here we also see as volatility comes up that we see are our option customers reengage gives them an opportunity to take advantages of some opportunities that they see in the market, so we think those are both very broad.

Okay, so I guess with that activity you seek cash levels is there any change in cash levels as well or…

Yes, so I guess as we were coming into October, we saw a cash start to come back up and then if we saw the volatility increase. We saw cash come back down to around where we ended the period but margin balances went up.

Got it. Thanks a lot.

Your next question comes from the line of Dan Fannon from Jefferies. Please go ahead.

Thanks. Good morning. Can you discuss the Scottrade revenue opportunity, it does seem as if the first year came in better than expected and I guess can you talk about what's left in were you still see opportunity across sell and penetrate the customer is more?

As either said last quarter it's really in our mind only been a couple of quarters because the some other revenue synergies point of view it really starts after a February conversion work we're quite comfortable with our expense synergies. We achieved in 2018 and 2019 a little bit more than we forecasted over 60, and on the revenue side that we articulate is basically 11 categories of ways that we think we will get revenue synergies and we've mapped them out for the next five years in terms of what our expectations were. After first quarter and still now after the second quarter post the integration weekend itself, we're running somewhere between the two and three year mark of the weighted average of all of those 11 categories, so we're very comfortable at the rate of call at the Scottrade client comfort with our offering and as we said in my prepared remarks. I think our mobile trade levels were up 100% from where they were derivatives trading by that client base up 50% from where they were. So fairly significant list in activity, and so, we continue to be very pleased with how it's gone.

Great and then on your 2018 strategic teams was kind of diversifying revenue. I guess can you talk about what you had a couple years or longer term what your ideal revenue mix is and kind of how you get there from here in terms of new products or which you haven't really talked about M&A but I guess organically how you think you can get or what that mix looks like?

Yes, well we're comfortable with our progress we're up 20 plus in our call it third revenue stream. On the other hand our other revenue streams are growing even faster which makes it difficult to change your mix. So we have launched a few products which help with that obviously our personalized portfolio which is launched a few months ago has off to a great start and we've got our ETF market center and others that help to make that but in terms of a long-term goal we don't really have an established ratio percentage but as you say there might be opportunities to take advantage of the growth opportunities to balance that out either organically or through M&A.

Great, thank you.

Your next question comes from the line of Chris Allen from Compass Group. Please go ahead.

Good morning guys. I think most of basically been covered. I guess one question just on the repo trade all that you gave it sounds it's one packet in prior periods ongoing impression there, does it factor in increased adoption Scottrade customer utilizing derivatives which I would think would have a beneficial impact on repo trade moving forward?

It's as you said Chris it's really just a look back at the last four years of exclude the one big price move that sort of the 2% to 3% but to your point we are seeing various things that impact the overall commission per trade, one positive item has been the lift in derivatives from Scottrade customers which is as you point out the option trades in particular are higher average commission, SO that's one of the net positives but as we grow our future's business that's one of the lowest commission per trade items that we have, so there's a lot of items that play into the mix over time. We're comfortable that with that looking back at history it's probably the right way to think about it.

Got it and just quick follow-up on the you noted Scottrade customers derivative adoption of 50% year-over-year I'm just wondering how do that customer base compares kind of legacy customer base at present trying to think about the opportunity set moving forward from there?

Yes, as we said before, the Scottrade client base was call it looked like a lot like the TD Ameritrade client base, but it was less active, add less educational tool, they had less platforms and capability so our revenue synergy premise was similar to what we had seen in other acquisitions, notably in, Chris, when we introduced a series of additional capabilities and tools to that got very client or to the in that example the TD Ameritrade client we saw an adoption of the new tools fairly dramatically and rapidly and precisely what we're seeing with the Scottrade client.

Yes and I think if you're looking for a number but I think when we bought Scottrade you know their numbers were sort of in the low teens in terms of derivatives and so we've seen a nice uptick but from a relatively low base and what we're seeing now is that their mobile trades and their derivative trades are starting to approach the legacy TD Ameritrade levels.

Good, thanks, Chris.

Your next question comes from the line of Patrick O'Shaughnessy from Raymond James. Please go ahead. Patrick O'Shaughnessy: Hey, good morning. On that, your retail channel net new asset growth rate get to below 3% in fiscal 2018, which to be fair is partially functional Scottrade attrition what you expected and then how denominator retail client assets, but how optimistic are you that you can drive that retail client asset growth rate back up to the 4% to 5% percent level where it's historically stood?

Yes, thanks. Great question. You're absolutely right, what we expected was the attrition that we would see this year as the result of I think two factors, not just the Scottrade clients being converted to the TD Ameritrade platform, and then deciding whether they wish to stay or not that was the spike we saw in the second quarter and to some degree is abating now. The second factor is that there is not a small amount of distraction from our business in our channels notably in retail as the integration itself was being done. So, the good news is that last quarter I think we reported our retail institutional M&A split of 85-15, and then announced back more about 80, 20 and we are continue to see great momentum building and certainly in light of this particular quarter it's getting better. So we expect our retail growth rate continue to accelerate as we bed down all of our new extended branches and deliver more and more capabilities to our clients. Patrick O'Shaughnessy: Thanks, and then a follow-up, I'm not sure how much you're going to be able saying this but in September just a core trying to transaction status to lawsuit regarding your order out of practice is what's the process from here for that lawsuit and how confident are you that TD Ameritrade order out of practice as will be shown to be consistent with your best execution requirements?

Yes, that we're very comfortable with our vision. Particularly law suit we're talking about we've appealed. Interesting to note that we've had two supporting brief filed by both SISMA and The Chamber of Commerce. The strength of argument, obviously I can't comment more on that. So we completely believe that we focus on best execution for our clients and that our disclosures are very strong, and that payment for order flow is a legitimate form of revenue offsetting the cost and giving us one good solid offer that delivers the great opportunity for retail client. Patrick O'Shaughnessy: Great, thank you.

Your next question comes from the line of Craig Siegenthaler from Credit Suisse. Please go ahead.

Thanks, guys. Good morning.

Good morning.

In the institutional channel, how is transition systems expense has trended in fiscal 2018 versus last year?

I'm sorry. Can you say that again? I completely lost that.

Yes. So in the institutional RA channel, how has transition assistance expense trended in fiscal 2018 versus the prior year?

Yes, I think, Craig, we don't track that number in detail at the corporate level. Anyway, but I do think what we're seeing is we're seeing very good engagement with breakaway brokers, you know, the percentage of ends that we're seeing from breakaway brokers is up significantly this year, and we think that that's a good use of our expenses. So it's not a big part of our total expense base, but we are seeing that - that's a big area of emphasis for us. And we're also seeing that as we're getting significant A-cats and there're some costs related to that were occurring, but again, well worth it for those clients that are going to be here for the long-term.

And then just as my follow-up on the BDA, we saw your comments at fixed income was the biggest substitute but you have the rough mix where clients for moving their money when they pull out of cash last quarter between like money markets finds stocks, equity funds, ETS fixed income et cetera?

No, it's hard to get at, Craig, because what we're seeing is that there's a modest amount of fixed income in substitution. There's lot of buys and sells out there, right? So, as our clients, you know, as their equity balances are going up and they're reallocating into fixed income that comes in a fixed income purchase et cetera, etcetera. So it's really hard to sort through exactly where we're going, but we can see by virtue of the way our clients act that on the institutional side they're more likely to move into a purchase money market fund; on the retail side; they're more likely to purchase CDs on our platform.

Thank you.

Your next question comes from the line of Mac Sykes from Gabelli. Please go ahead.

Good morning, everyone. Can you provide some more perspectives on the competitive dynamics of some of the "Free Trading Platforms," which seem to rely on enhance payment for order flow for their economics? I mean how should you think about that competitive segment versus some of your more major competitors?

Yes, look, it is a competitive environment. We're constantly watching who is in our space. The free trading model is certainly not new. In fact, in our history, at TD Ameritrade we had a product that was called Free Trade long ago. And it relied on some of the same components. So, as I said, there is no such thing as a truly free model. There is revenue mixed into our business model, it's just for trade differently perhaps for the end client. We like our model. It is a fantastic client offering at one all inclusive, if you will, price. But to your main point, have we seen much of an impact, well, arguably not. As I said, our new accounts are up almost 50% year-over-year, and we have a great opportunity to continue to grow and invest with our current revenue stream and price point. So we're quite comfortable with where we are.

Thank you.

There are no further questions at this time. I'll turn the call back over to Mr. Hockey.

Great. Well, thanks everybody. I hope you liked our new disclosure. We think less is more, and it really gets to the main points that you need to have an understanding of our outlook. We're quite excited about 2018. It was a really transitional, fantastic year for us, set to top on a new course and a new base, and we're looking forward to continuing the first few weeks of fantastic energy and growth here in 2019. So we'll see you next quarter.

This concludes today's conference call. You may now disconnect.