With the economy on the mend, we expect Charles Schwab (NYSE:SCHW) users to pick up the pace on their trading activities. In the Charles Schwab Active Trader Sentiment Survey reported that active traders are bullish about the market. This rejuvenated sentiment could spark an increase in trading revenues for Charles Schwab and competitors E-Trade (NASDAQ:ETFC), Ameritrade (NYSE:AMTD), Fidelity and Bank of America (NYSE:BAC). (See: Schwab Survey Points to Improved Trading Revenues for 2011)
The recent optionsXpress acquisition will also expand Schwab’s portfolio of offerings to include forex trading, which can potentially increase the number of trades. While we estimate Schwab’s number of annual trades per account will rise to over 10 by the end of our forecast period, Trefis members anticipate users trading more than 13x a year, implying almost 5% upside to our $19.64 for Charles Schwab’s stock.
Investors Getting Ready to Invest in Rising Market
- Schwab Gains Notably From Interest Earning Assets In Q3
- Schwab’s Key Monthly Metrics Continue Sustained Growth In August
- How Have Assets Managed By The 5 Largest ETF Providers Changed Over The Last Five Quarters?
- Schwab Monthly Brokerage Metrics: Interest-Earning Assets Growth Continues In July
- Schwab Earnings: Higher Net Yields Continue To Drive Revenues
- Schwab Earnings Preview: Net Interest Income, Transaction-Based Revenue To Drive Results
Charles Schwab Active Trader Sentiment Survey indicates that traders and investors have positive sentiments on markets. All the traders who participated in the survey had traded at least 36 times over the period of a year. And almost half of them (47%) have a positive outlook towards the market, with 77% viewing the market’s volatility as a favorable factor. 
We forecast that as market uncertainty related to European sovereign debt crisis, the unrest in the Middle East and the Japan crisis eases in 2011, Schwab’s average number of annual trades per account will reverse the trend and grow due to increased volume of equity transaction trades.
optionsXpress Acquisition Widens Schwab’s Forex Trading Business
The gradual improvement in the global economy since 2008′s downturn has seen the foreign exchange market surpass its size in 2007 in terms of average daily trading volumes. Retail forex volumes are now more than 30% larger than the average daily turnover for equity markets.
The optionsXpress Acquisition will benefit Schwab’s customers as it provides a cheap and easy way for investors to trade stocks and options, and it will help drive more trades and customer stickiness.Notes:
- New Charles Schwab Survey Finds Most Active Traders Plan to Invest Tax Refunds, Schwab Press Releases, May 3, 2011 [↩]