AMTD 10-Q Quarterly Report June 30, 2010

TD AMERITRADE HOLDING CORP

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10-Q 1 c58368e10vq.htm FORM 10-Q e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


þ		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

		for the quarterly period ended June 30, 2010


o		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

		for the transition period from to

Commission file number: 0-49992

TD AMERITRADE HOLDING CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		8 2-0543156
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

4211 South 102 ^nd Street, Omaha, Nebraska, 68127
(Address of principal executive offices) (Zip Code)

(402) 331-7856
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months, and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding twelve months. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

As of July 31, 2010, there were 576,070,620 outstanding shares of the registrant’s common stock.

TD AMERITRADE HOLDING CORPORATION

INDEX


	Page No.
Part I — FINANCIAL INFORMATION

Item 1. Financial Statements
Report of Independent Registered Public Accounting Firm		3
Condensed Consolidated Balance Sheets		4
Condensed Consolidated Statements of Income		5
Condensed Consolidated Statements of Cash Flows		6
Notes to Condensed Consolidated Financial Statements		8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		29

Item 3. Quantitative and Qualitative Disclosures About Market Risk		43

Item 4. Controls and Procedures		44

Part II — OTHER INFORMATION

Item 1. Legal Proceedings		44

Item 1A. Risk Factors		46

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities		46

Item 6. Exhibits		47

Signatures		48
EX-15.1
EX-31.1
EX-31.2
EX-32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT

Part I — FINANCIAL INFORMATION

Item 1. — Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
TD AMERITRADE Holding Corporation

We have reviewed the condensed consolidated balance sheet of TD AMERITRADE Holding Corporation (the Company) as of June 30, 2010, and the related condensed consolidated statements of income for the three-month and nine-month periods ended June 30, 2010 and 2009, and condensed consolidated statements of cash flows for the nine-month periods ended June 30, 2010 and 2009. These financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of TD AMERITRADE Holding Corporation as of September 30, 2009, and the related consolidated statements of income, stockholders’ equity, and cash flows for the year then ended (not presented herein) and in our report dated November 13, 2009, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of September 30, 2009, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ ERNST & YOUNG LLP

Minneapolis, Minnesota
August 9, 2010

TD AMERITRADE HOLDING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)


	June 30,			September 30,
	2010			2009
	(Unaudited)
ASSETS
Cash and cash equivalents	$	716,463		$	791,211
Short-term investments		1,853			52,071
Cash and investments segregated in compliance with federal regulations		489,930			5,813,862
Receivable from brokers, dealers and clearing organizations		782,055			1,777,741
Receivable from clients — net of allowance for doubtful accounts		7,531,315			5,712,261
Receivable from affiliates		77,488			92,974
Other receivables — net of allowance for doubtful accounts		63,985			73,921
Securities owned, at fair value		257,218			23,405
Property and equipment — net of accumulated depreciation and amortization		260,973			238,256
Goodwill		2,467,223			2,472,098
Acquired intangible assets — net of accumulated amortization		1,148,999			1,224,722
Deferred income taxes		10,699			17,161
Other assets		124,037			82,127


Total assets	$	13,932,238		$	18,371,810


LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Payable to brokers, dealers and clearing organizations	$	1,973,822		$	2,491,617
Payable to clients		5,896,317			9,914,823
Accounts payable and accrued liabilities		500,701			700,786
Payable to affiliates		3,696			3,724
Deferred revenue		71,830			72,134
Long-term debt		1,280,933			1,414,900
Capitalized lease obligations		22,715			28,565
Deferred income taxes		350,335			193,978


Total liabilities		10,100,349			14,820,527


Stockholders’ equity:
Preferred stock, $0.01 par value; 100 million shares authorized, none issued		—			—
Common stock, $0.01 par value; one billion shares authorized; 631,381,860 shares issued; June 30, 2010 - 576,778,430 outstanding; September 30, 2009 - 587,109,497 outstanding		6,314			6,314
Additional paid-in capital		1,555,811			1,574,638
Retained earnings		3,008,346			2,530,117
Treasury stock, common, at cost — June 30, 2010 - 54,603,430 shares; September 30, 2009 - 44,272,363 shares		(738,698	)		(559,883	)
Deferred compensation		196			171
Accumulated other comprehensive loss		(80	)		(74	)


Total stockholders’ equity		3,831,889			3,551,283


Total liabilities and stockholders’ equity	$	13,932,238		$	18,371,810

See notes to condensed consolidated financial statements.

TD AMERITRADE HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended June 30,						Nine Months Ended June 30,
	2010			2009			2010			2009

Revenues:
Transaction-based revenues:
Commissions and transaction fees	$	333,081		$	338,450		$	943,740		$	891,005

Asset-based revenues:
Interest revenue		112,804			101,204			315,457			263,960
Brokerage interest expense		(1,422	)		(2,564	)		(4,694	)		(13,076	)

Net interest revenue		111,382			98,640			310,763			250,884

Insured deposit account fees		180,075			125,118			505,370			424,886
Investment product fees		33,194			39,085			92,964			156,346

Total asset-based revenues		324,651			262,843			909,097			832,116

Other revenues		34,072			12,475			99,019			26,875


Net revenues		691,804			613,768			1,951,856			1,749,996


Operating expenses:
Employee compensation and benefits		156,251			128,216			467,767			366,413
Clearing and execution costs		22,387			16,141			68,422			46,846
Communications		27,030			20,795			76,329			57,392
Occupancy and equipment costs		35,452			29,951			104,184			89,614
Depreciation and amortization		14,499			11,162			41,573			33,299
Amortization of acquired intangible assets		25,119			17,551			75,722			48,289
Professional services		31,998			43,949			97,170			93,358
Advertising		51,596			41,376			188,359			141,170
Gains on money market funds and client guarantees		(9,209	)		—			(11,145	)		—
Other		36,420			14,513			75,347			34,798

Total operating expenses		391,543			323,654			1,183,728			911,179


Operating income		300,261			290,114			768,128			838,817

Other expense:
Interest on borrowings		11,197			8,365			33,764			32,246
Loss on debt refinancing		—			—			8,392			—
Loss on sale of investments		—			2,003			—			2,003

Total other expense		11,197			10,368			42,156			34,249


Pre-tax income		289,064			279,746			725,972			804,568
Provision for income taxes		109,625			109,209			247,743			317,603


Net income	$	179,439		$	170,537		$	478,229		$	486,965


Earnings per share — basic	$	0.31		$	0.30		$	0.81		$	0.84
Earnings per share — diluted	$	0.30		$	0.30		$	0.80		$	0.83

Weighted average shares outstanding — basic		587,086			563,792			588,176			576,420
Weighted average shares outstanding — diluted		593,647			571,772			595,221			584,623

See notes to condensed consolidated financial statements.

TD AMERITRADE HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands, except share amounts)


	Nine Months Ended June 30,
	2010			2009
Cash flows from operating activities:
Net income	$	478,229		$	486,965
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		41,573			33,299
Amortization of acquired intangible assets		75,722			48,289
Deferred income taxes		159,856			(76,890	)
Loss on sale of investments		—			2,003
Loss on disposal of property		2,533			3,005
Gains on money market funds and client guarantees		(11,145	)		—
Loss on debt refinancing		8,392			—
Stock-based compensation		25,090			17,530
Excess tax benefits on stock-based compensation		(13,095	)		(4,841	)
Other, net		154			57
Changes in operating assets and liabilities:
Cash and investments segregated in compliance with federal regulations		5,323,932			(4,991,563	)
Receivable from brokers, dealers and clearing organizations		995,686			2,652,965
Receivable from clients, net		(1,819,054	)		1,921,697
Receivable from/payable to affiliates, net		14,825			110,442
Other receivables, net		9,857			13,349
Securities owned		(225,361	)		30,371
Other assets		(11,982	)		(11,604	)
Payable to brokers, dealers and clearing organizations		(517,795	)		(3,500,931	)
Payable to clients		(4,018,506	)		4,117,513
Accounts payable and accrued liabilities		(175,866	)		39,453
Deferred revenue		(304	)		3,748


Net cash provided by operating activities		342,741			894,857


Cash flows from investing activities:
Purchase of property and equipment		(61,180	)		(45,799	)
Cash and cash equivalents acquired in business combinations		—			86,423
Cash paid in business combinations		—			(266,713	)
Cash received in sale of business, net		—			326
Purchase of short-term investments		(3,296	)		—
Proceeds from sale and maturity of short-term investments		3,300			—
Proceeds from redemption of money market funds		51,478			317,015
Proceeds from sale of other investments available-for-sale		—			2,868
Other		(2	)		(146	)


Net cash provided by (used in) investing activities		(9,700	)		93,974

See notes to condensed consolidated financial statements.

TD AMERITRADE HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

(Unaudited)

(In thousands, except share amounts)


	Nine Months Ended June 30,
	2010			2009
Cash flows from financing activities:
Proceeds from issuance of long-term debt	$	1,248,557		$	—
Payment of debt issuance costs		(10,595	)		—
Principal payments on long-term debt		(1,410,638	)		(102,125	)
Principal payments on capital lease obligations		(11,853	)		(2,263	)
Proceeds from exercise of stock options; Nine months ended June 30, 2010 - 3,362,788 shares; 2009 - 3,397,849 shares		11,842			22,233
Purchase of treasury stock; Nine months ended June 30, 2010 - 14,228,369 shares; 2009 - 38,991,221 shares		(248,188	)		(465,452	)
Excess tax benefits on stock-based compensation		13,095			4,841


Net cash used in financing activities		(407,780	)		(542,766	)


Effect of exchange rate changes on cash and cash equivalents		(9	)		(376	)


Net increase (decrease) in cash and cash equivalents		(74,748	)		445,689

Cash and cash equivalents at beginning of period		791,211			674,135

Cash and cash equivalents at end of period	$	716,463		$	1,119,824


Supplemental cash flow information:
Interest paid	$	33,847		$	51,893
Income taxes paid	$	233,009		$	262,863
Tax benefit on exercises and distributions of stock-based compensation	$	17,396		$	5,207
Noncash investing and financing activities:
Issuance of capital lease obligations	$	6,003		$	12,441
Issuance of long-term debt in exchange for assets acquired	$	—		$	8,400
Issuance of common stock in business combinations	$	—		$	362,967

See notes to condensed consolidated financial statements.

TD AMERITRADE HOLDING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three-Month and Nine-Month Periods Ended June 30, 2010 and 2009

(Unaudited)

1. BASIS OF PRESENTATION

The condensed consolidated financial statements include the accounts of TD AMERITRADE Holding Corporation and its wholly-owned subsidiaries (collectively, the “Company”). Intercompany balances and transactions have been eliminated.

These financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, reflect all adjustments, which are all of a normal recurring nature, necessary to present fairly the financial position, results of operations and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report filed on Form 10-K for the fiscal year ended September 30, 2009.

Reclassifications:

Approximately $2.0 million has been reclassified from professional services to advertising expense for the three and nine months ended June 30, 2009 on the Condensed Consolidated Statements of Income. This reclassification was made in order to conform to the current financial statement presentation.

Recently Adopted Accounting Pronouncements:

ASC 805 — On October 1, 2009, the Company adopted Accounting Standards Codification (“ASC”) 805, Business Combinations . ASC 805 generally requires an acquirer to recognize the identifiable assets acquired, liabilities assumed, contingent purchase consideration and any noncontrolling interest in the acquiree at fair value on the date of acquisition. It also requires an acquirer to recognize as expense most transaction and restructuring costs as incurred, rather than include such items in the cost of the acquired entity. For the Company, ASC 805 applies prospectively to business combinations for which the acquisition date is on or after October 1, 2009. The adoption of ASC 805 did not have a material impact on the Company’s condensed consolidated financial statements.

ASC 820-10 and ASU 2010-06 — On October 1, 2009, the Company adopted ASC 820-10, Fair Value Measurements and Disclosures , for nonfinancial assets and liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis. In January 2010, the Company adopted Accounting Standards Update (“ASU”) 2010-06, Improving Disclosures about Fair Value Measurements. ASU 2010-06 requires new disclosures and clarifies existing disclosure requirements about fair value measurements as set forth in ASC 820-10. The adoption of ASC 820-10 and ASU 2010-06 did not have a material impact on the Company’s condensed consolidated financial statements.

2. GOODWILL AND ACQUIRED INTANGIBLE ASSETS

The Company has recorded goodwill for purchase business combinations to the extent the purchase price of each completed acquisition exceeded the fair value of the net identifiable tangible and intangible assets of each acquired company. The following table summarizes changes in the carrying amount of goodwill for the nine months ended June 30, 2010 (dollars in thousands):


Balance as of September 30, 2009	$	2,472,098

Purchase accounting adjustments, net of income taxes ⁽¹⁾		(574	)
Tax benefit on stock-based compensation awards ⁽²⁾		(4,301	)


Balance as of June 30, 2010	$	2,467,223


(1)		Purchase accounting adjustments primarily consist of adjustments to assumed liabilities relating to the acquisition of thinkorswim Group Inc. (“thinkorswim”) in fiscal 2009.


(2)		Represents the tax benefit realized on replacement stock awards that were issued in connection with the Datek Online Holdings Corp. (“Datek”) merger in fiscal 2002 and the thinkorswim acquisition. The tax benefit realized on a stock award is recorded as a reduction of goodwill to the extent the Company recorded fair value of the replacement award in the purchase accounting. To the extent any gain realized on a stock award exceeds the fair value of the replacement award recorded in the purchase accounting, the tax benefit on the excess is recorded as additional paid-in capital.

The Company’s acquired intangible assets consist of the following as of June 30, 2010 (dollars in thousands):


	Gross					Net
	Carrying		Accumulated			Carrying
	Amount		Amortization			Amount
Client relationships	$	1,230,469	$	(320,547	)	$	909,922
Technology and content		100,904		(15,499	)		85,405
Trade names		10,100		(5,659	)		4,441
Non-competition agreement		5,486		(1,929	)		3,557
Trademark license		145,674		—			145,674

	$	1,492,633	$	(343,634	)	$	1,148,999

Estimated future amortization expense for acquired intangible assets outstanding as of June 30, 2010 is as follows (dollars in thousands):


	Estimated
	Amortization
Fiscal Year	Expense
2010 Remaining	$	24,539
2011		96,725
2012		92,901
2013		91,630
2014		91,173
2015		90,290
Thereafter (to 2025)		516,067

Total	$	1,003,325

3. CASH AND CASH EQUIVALENTS

The Company’s cash and cash equivalents is summarized in the following table (dollars in thousands):


	June 30,		September 30,
	2010		2009
Corporate	$	127,436	$	273,137
Broker-dealer subsidiaries		510,593		473,996
Trust company subsidiary		51,488		25,143
Investment advisory subsidiaries		26,946		18,935

Total	$	716,463	$	791,211

Capital requirements may limit the amount of cash available for dividend from the broker-dealer and trust company subsidiaries to the parent company. Cash and cash equivalents of the investment advisory subsidiaries is generally not available for corporate purposes.

4. INCOME TAXES

The Company’s effective income tax rate for the nine months ended June 30, 2010 was 34.1%, compared to 39.5% for the nine months ended June 30, 2009. The provision for income taxes for the nine months ended June 30, 2010 was unusually low due to $28.8 million of favorable resolutions of certain federal and state income tax matters. These items favorably impacted the Company’s earnings for the nine months ended June 30, 2010 by approximately $0.05 per share. The provision for income

taxes for the nine months ended June 30, 2009 was slightly higher than normal due to unfavorable deferred income tax adjustments of $8.9 million resulting from state income tax law changes and capital loss limitations on certain money market mutual fund holdings. These items unfavorably impacted the Company’s earnings for the nine months ended June 30, 2009 by approximately $0.02 per share.

5. LONG-TERM DEBT

Long-term debt consists of the following (dollars in thousands):


	June 30,		September 30,
	2010		2009
$250 million 2.950% Senior Notes due 2012 ⁽¹⁾	$	255,080	$	—
$500 million 4.150% Senior Notes due 2014 ⁽²⁾		522,240		—
$500 million 5.600% Senior Notes due 2019 ⁽³⁾		499,351		—
Term A Facility		—		140,625
Term B Facility		—		1,265,875
Other		4,262		8,400

Total long-term debt	$	1,280,933	$	1,414,900


(1)		Balance includes a $5.3 million unrealized loss related to an interest rate swap, and is net of unamortized discount of $0.2 million.

(2)		Balance includes a $22.7 million unrealized loss related to an interest rate swap, and is net of unamortized discount of $0.5 million.

(3)		Balance is net of unamortized discount of $0.6 million.

Fiscal year maturities on long-term debt outstanding at June 30, 2010 are as follows (dollars in thousands):


2010 Remaining	$	—
2011		4,262
2012		—
2013		250,000
2014		—
2015		500,000
Thereafter		500,000

Total	$	1,254,262

Senior Notes — On November 25, 2009 the Company sold, through a public offering, $1.25 billion aggregate principal amount of unsecured senior notes, consisting of $250 million aggregate principal amount of 2.950% Senior Notes due December 1, 2012 (the “2012 Notes”), $500 million aggregate principal amount of 4.150% Senior Notes due December 1, 2014 (the “2014 Notes”) and $500 million aggregate principal amount of 5.600% Senior Notes due December 1, 2019 (the “2019 Notes” and, collectively with the 2012 Notes and the 2014 Notes, the “Senior Notes”). The Senior Notes were issued at an aggregate discount of $1.4 million, which is being amortized to interest expense over the terms of the respective Senior Notes. Interest on the Senior Notes is payable semi-annually in arrears on June 1 and December 1 of each year.

On November 25, 2009, the Company used the net proceeds from the issuance of the Senior Notes, together with approximately $158 million of cash on hand, to repay in full the outstanding principal under the Company’s January 23, 2006 credit agreement. Upon repayment, the January 23, 2006 credit agreement (including the Term A Facility, the Term B Facility and the Revolving Facility as amended on November 5, 2009) was automatically amended and restated in its entirety pursuant to the Amended and Restated Credit Agreement (the “Restated Credit Agreement”), dated as of November 25, 2009, as described below.

The Senior Notes are jointly and severally and fully and unconditionally guaranteed by each of the Company’s current and future subsidiaries that is or becomes a borrower or a guarantor under the Restated Credit Agreement. Currently, the only subsidiary guarantor of the obligations under the Senior Notes is TD AMERITRADE Online Holdings Corp. (“TDAOH”). The Senior Notes and the guarantee by TDAOH are the general senior unsecured obligations of the Company and TDAOH.

The Company may redeem each series of the Senior Notes, in whole at any time or in part from time to time, at a redemption price equal to the greater of (a) 100% of the principal amount of the notes being redeemed, and (b) the sum of the present values of the remaining scheduled payments of principal and interest on the notes being redeemed, discounted to the date of

redemption on a semi-annual basis at the comparable U.S. Treasury rate, plus: 25 basis points in the case of the 2012 Notes, 30 basis points in the case of the 2014 Notes and 35 basis points in the case of the 2019 Notes, plus, in each case, accrued and unpaid interest to the date of redemption.

Interest Rate Swaps — The Company is exposed to changes in the fair value of its fixed-rate Senior Notes resulting from interest rate fluctuations. To hedge this exposure, on December 30, 2009, the Company entered into fixed-for-variable interest rate swaps on the 2012 Notes and 2014 Notes for notional amounts of $250 million and $500 million, respectively, with maturity dates matching the respective maturity dates of the 2012 Notes and 2014 Notes. The interest rate swaps effectively change the fixed-rate interest on the 2012 Notes and 2014 Notes to variable-rate interest. Under the terms of the interest rate swap agreements, the Company receives semi-annual fixed-rate interest payments based on the same rates applicable to the 2012 Notes and 2014 Notes, and makes quarterly variable-rate interest payments based on three-month LIBOR plus (a) 0.9693% for the swap on the 2012 Notes and (b) 1.245% for the swap on the 2014 Notes.

The interest rate swaps are accounted for as fair value hedges and qualify for the shortcut method of accounting. Changes in the payment of interest resulting from the interest rate swaps are recorded as an offset to interest on borrowings on the Condensed Consolidated Statements of Income. Changes in fair value of the interest rate swaps are completely offset by changes in fair value of the related notes, resulting in no effect on net income. For the nine months ended June 30, 2010, the Company recorded a $28.0 million gain for the change in fair value of the interest rate swaps and an offsetting $28.0 million fair value loss on the hedged fixed-rate debt. The offsetting fair value gains and losses were recorded in interest on borrowings on the Condensed Consolidated Statements of Income.

The following table summarizes the fair value of outstanding derivatives designated as hedging instruments on the Condensed Consolidated Balance Sheets (dollars in thousands):


	June 30,		September 30,
	2010		2009
Derivatives recorded under the caption Other assets:
Interest rate swap assets	$	27,963	$	—

The interest rate swaps are subject to counterparty credit risk. Credit risk is managed by limiting activity to approved counterparties that meet a minimum credit rating threshold and by entering into credit support agreements. The bilateral credit support agreement related to the interest rate swaps requires daily collateral coverage, in the form of cash or U.S. Treasury securities, for the aggregate fair value of the interest rate swaps. As of June 30, 2010, the interest rate swap counterparty had pledged $30.4 million of collateral to the Company, in the form of U.S. Treasury securities.

Restated Revolving Facility — The Restated Credit Agreement consists of a senior unsecured revolving credit facility in the aggregate principal amount of $300 million (the “Restated Revolving Facility”). The maturity date of the Restated Revolving Facility is December 31, 2012. The applicable interest rate under the Restated Revolving Facility is calculated as a per annum rate equal to, at the option of the Company, (a) LIBOR plus an interest rate margin (“LIBOR loans”) or (b) (i) the highest of (x) the prime rate, (y) the federal funds effective rate plus 0.50% or (z) one-month LIBOR plus 1.00%, plus (ii) an interest rate margin (“Base Rate loans”). The interest rate margin ranges from 2.00% to 4.00% for LIBOR loans and from 1.00% to 3.00% for Base Rate loans, determined by reference to the Company’s public debt ratings. The Company is obligated to pay a commitment fee ranging from 0.225% to 0.750% on any unused amount of the Restated Revolving Facility, determined by reference to the Company’s public debt ratings. As of June 30, 2010, the interest rate margin would be 2.50% for LIBOR loans and 1.50% for Base Rate loans, and the commitment fee is 0.375% per annum, each determined by reference to the Company’s current Standard & Poor’s public debt rating of BBB+. There were no borrowings outstanding under the Restated Revolving Facility as of June 30, 2010.

The obligations under the Restated Credit Agreement are guaranteed by each “significant subsidiary” (as defined in SEC Rule 1-02(w) of Regulation S-X) of the Company, other than broker-dealer subsidiaries, futures commission merchant subsidiaries and controlled foreign corporations. Currently, the only subsidiary guarantor of the obligations under the Restated Credit Agreement is TDAOH.

in an aggregate principal amount in excess of $100 million that includes any covenants that are more restrictive (taken as a whole) as to the Company than those contained in the Restated Credit Agreement, unless the Restated Credit Agreement is amended to include such more restrictive covenants prior to the incurrence of such additional indebtedness. The Company was in compliance with all covenants under the Restated Credit Agreement as of June 30, 2010.

Broker-Dealer Credit Facilities — The Company, through its wholly-owned broker-dealer subsidiaries, had access to secured uncommitted credit facilities with financial institutions of up to $630 million as of June 30, 2010 and September 30, 2009. The broker-dealer subsidiaries also had access to unsecured uncommitted credit facilities of up to $150 million as of June 30, 2010 and September 30, 2009. The financial institutions may make loans under line of credit arrangements or, in some cases, issue letters of credit under these facilities. The secured credit facilities require the Company to pledge qualified client securities to secure outstanding obligations under these facilities. Borrowings under the secured and unsecured credit facilities bear interest at a variable rate based on the federal funds rate. There were no borrowings outstanding or letters of credit issued under the secured or unsecured credit facilities as of June 30, 2010 and September 30, 2009. As of June 30, 2010 and September 30, 2009, approximately $780 million was available to the Company’s broker-dealer subsidiaries pursuant to uncommitted credit facilities for either loans or, in some cases, letters of credit.

6. CAPITAL REQUIREMENTS

The Company’s broker-dealer subsidiaries are subject to the SEC Uniform Net Capital Rule (Rule 15c3-1 under the Securities Exchange Act of 1934), which requires the maintenance of minimum net capital, as defined. Net capital is calculated for each broker-dealer subsidiary individually. Excess net capital of one broker-dealer subsidiary may not be used to offset a net capital deficiency of another broker-dealer subsidiary. Net capital and the related net capital requirement may fluctuate on a daily basis.

Net capital and net capital requirements for the Company’s broker-dealer subsidiaries are summarized in the following table (dollars in thousands):


	June 30, 2010						September 30, 2009
			Minimum						Minimum
			Net Capital		Excess				Net Capital		Excess
	Net Capital		Required		Net Capital		Net Capital		Required		Net Capital
TD AMERITRADE Clearing, Inc.	$	1,086,600	$	170,353	$	916,247	$	855,630	$	137,943	$	717,687
TD AMERITRADE, Inc.		269,976		1,000		268,976		263,957		500		263,457
Bellevue Chicago, LLC		87,786		590		87,196		43,677		2,376		41,301

Totals	$	1,444,362	$	171,943	$	1,272,419	$	1,163,264	$	140,819	$	1,022,445

TD AMERITRADE Clearing, Inc. (“TDA Clearing”) is a clearing broker-dealer and TD AMERITRADE, Inc. (“TDA Inc.”) and Bellevue Chicago, LLC (formerly thinkorswim, Inc.) are introducing broker-dealers.

The Company’s non-depository trust company subsidiary, TD AMERITRADE Trust Company (“TDATC”), is subject to capital requirements established by the State of Maine, which requires TDATC to maintain minimum Tier 1 capital, as defined. TDATC’s Tier 1 capital was $22.6 million and $14.7 million as of June 30, 2010 and September 30, 2009, respectively, which exceeded the required Tier 1 capital by $12.6 million and $4.7 million, respectively.

7. COMMITMENTS AND CONTINGENCIES

Spam Litigation — A purported class action, captioned Elvey v. TD Ameritrade, Inc. , was filed on May 31, 2007 in the United States District Court for the Northern District of California. The complaint alleges that there was a breach in TDA Inc.’s systems, which allowed access to e-mail addresses and other personal information of account holders, and that as a result account holders received unsolicited e-mail from spammers promoting certain stocks and have been subjected to an increased risk of identity theft. The complaint requests unspecified damages and injunctive and other equitable relief. A second lawsuit, captioned Zigler v. TD Ameritrade, Inc. , was filed on September 26, 2007, in the same jurisdiction on behalf of a purported nationwide class of account holders. The factual allegations of the complaint and the relief sought are substantially the same as those in the first lawsuit. The cases were consolidated under the caption In re TD Ameritrade Accountholders Litigation . The Company hired an independent consultant to investigate whether identity theft occurred as a result of the breach. The consultant conducted four investigations from August 2007 to June 2008 and reported that it found no evidence of identity theft. The parties entered into an agreement to settle the lawsuits on a class basis subject to court approval. The court denied final approval of the proposed settlement on October 23, 2009. The court ruled that the asserted benefits of the settlement to

the class were not sufficient to warrant approval and that the proposed settlement was not fair, reasonable and adequate. The parties participated in a mediation on April 7, 2010 and discussed possible terms of a new settlement. The settlement discussions are continuing. The Company is unable to predict the outcome or the timing of the ultimate resolution of this matter, or the eventual loss that may result from this matter.

Auction Rate Securities Matters — The SEC and other regulatory authorities conducted investigations regarding the sale of auction rate securities (“ARS”). On July 20, 2009, TDA Inc. finalized settlements with the SEC and other regulatory authorities, concluding investigations by the regulators into TDA Inc.’s offer and sale of ARS. Under these settlement agreements, TDA Inc. commenced a tender offer to purchase, at par, from certain current and former account holders, eligible ARS that were purchased through TDA Inc. on or before February 13, 2008, provided the ARS were not transferred away from the firm prior to January 24, 2006. This offer did not extend to clients who purchased ARS through independent registered investment advisors or through another firm and transferred such securities to TDA Inc. In addition, TDA Inc. offered to make whole any losses sustained by eligible clients who purchased ARS through TDA Inc. on or before February 13, 2008 and sold such securities at a loss prior to July 20, 2009. TDA Inc. offered to reimburse clients whose borrowing costs exceeded the amount they earned in interest or dividends from their eligible ARS at the time they borrowed money from TDA Inc. to satisfy liquidity needs. TDA Inc. agreed to participate in a special arbitration process for the purpose of arbitrating eligible investors’ consequential damages claims arising from their inability to sell their eligible ARS. No fines were imposed by the regulators under the settlement agreements.

The offer commenced on August 10, 2009. The final phase of the offer expired on March 23, 2010 and TDA Inc. completed the repurchases on March 30, 2010. Through March 30, 2010, TDA Inc. purchased eligible ARS with an aggregate par value of approximately $305 million. The Company accounted for the ARS settlement as a financial guarantee. The Company recorded a charge to earnings of $13.8 million for the estimated fair value of this guarantee during the fourth quarter of fiscal 2009. As of September 30, 2009, a liability of $13.8 million for this guarantee was included in accounts payable and accrued liabilities on the Condensed Consolidated Balance Sheets. There is no liability recorded on the Condensed Consolidated Balance Sheet as of June 30, 2010, due to the completion of the offer. On March 30, 2010, the Company recorded a gain of $0.5 million based on the final fulfillment of the guarantee. The gain is included in gains on money market funds and client guarantees for the nine months ended June 30, 2010, on the Condensed Consolidated Statements of Income. As of June 30, 2010, TDA Inc. held ARS with a fair value of approximately $243 million.

Reserve Fund Matters — During September 2008, The Reserve, an independent mutual fund company, announced that the net asset value of the Reserve Yield Plus Fund declined below $1.00 per share. The Yield Plus Fund is not a money market mutual fund, but its stated objective was to maintain a net asset value of $1.00 per share. TDA Inc.’s clients hold shares in the Yield Plus Fund, which is being liquidated by The Reserve.

On July 23, 2010, The Reserve announced that through that date it had distributed approximately 94.8% of the Yield Plus Fund assets as of September 15, 2008 and that the Yield Plus Fund had approximately $39.7 million in total remaining assets. The Reserve stated that the fund’s Board of Trustees has set aside almost the entire amount of the remaining assets to cover potential claims, fees and expenses. The Company estimates that TDA Inc. clients’ current positions held in the Reserve Yield Plus Fund amount to approximately 82% of the fund, which, if valued based on a $1.00 per share net asset value, would total approximately $49.1 million.

The SEC and other regulatory authorities are conducting investigations regarding TDA Inc.’s offering of The Reserve Yield Plus Fund to clients. TDA Inc. has received subpoenas and other requests for documents and information from the regulatory authorities. TDA Inc. is cooperating with the investigations and requests. On June 17, 2010, the Pennsylvania Securities Commission filed an administrative order against the Company’s subsidiaries, TDA Inc. and Amerivest Investment Management, LLC (“Amerivest”), involving the sale of Yield Plus Fund securities to 21 Pennsylvania clients. An administrative hearing will be held to determine whether there have been violations of certain provisions of the Pennsylvania Securities Act of 1972 and rules thereunder, and to determine what, if any, administrative sanctions should be imposed. TDA Inc. and Amerivest are defending the action.

In November 2008, a purported class action lawsuit was filed with respect to the Yield Plus Fund. The lawsuit is captioned Ross v. Reserve Management Company, Inc. et al. and is pending in the U.S. District Court for the Southern District of New York. The Ross lawsuit is on behalf of persons who purchased shares of Reserve Yield Plus Fund. On November 20, 2009, the plaintiffs filed a first amended complaint naming as defendants the Fund’s advisor, certain of its affiliates and the Company and certain of its directors, officers and shareholders as alleged control persons. The complaint alleges claims of violations of the federal securities laws and other claims based on allegations that false and misleading statements and omissions were made in the Reserve Yield Plus Fund prospectuses and in other statements regarding the Fund. The complaint seeks an unspecified

amount of compensatory damages including interest, attorneys’ fees, rescission, exemplary damages and equitable relief. On January 19, 2010, the defendants submitted motions to dismiss the complaint.

The Company is unable to predict the outcome or the timing of the ultimate resolution of these matters, or the potential loss, if any, that may result from these matters.

Other Legal and Regulatory Matters — The Company is subject to other lawsuits, arbitrations, claims and other legal proceedings in connection with its business. Some of these legal actions include claims for substantial or unspecified compensatory and/or punitive damages. A substantial adverse judgment or other unfavorable resolution of these matters could have a material adverse effect on the Company’s financial condition, results of operations and cash flows or could cause the Company significant reputational harm. Management believes the Company has adequate legal defenses with respect to these legal proceedings to which it is a defendant or respondent and the outcome of these pending proceedings is not likely to have a material adverse effect on the financial condition, results of operations or cash flows of the Company. However, the Company is unable to predict the outcome or the timing of the ultimate resolution of these matters, or the potential losses, if any, that may result from these matters.

In the normal course of business, the Company discusses matters with its regulators raised during regulatory examinations or otherwise subject to their inquiry. These matters could result in censures, fines, penalties or other sanctions. Management believes the outcome of any resulting actions will not be material to the Company’s financial condition, results of operations or cash flows. However, the Company is unable to predict the outcome or the timing of the ultimate resolution of these matters, or the potential fines, penalties or injunctive or other equitable relief, if any, that may result from these matters.

Income Taxes — The Company’s federal and state income tax returns are subject to examination by taxing authorities. Because the application of tax laws and regulations to many types of transactions is subject to varying interpretations, amounts reported in the condensed consolidated financial statements could be significantly changed at a later date upon final determinations by taxing authorities. The Toronto-Dominion Bank (“TD”) has agreed to indemnify the Company for tax obligations, if any, pertaining to activities of TD Waterhouse Group, Inc. (“TD Waterhouse”) prior to the Company’s acquisition of TD Waterhouse.

General Contingencies — In the ordinary course of business, there are various contingencies that are not reflected in the condensed consolidated financial statements. These include the Company’s broker-dealer subsidiaries’ client activities involving the execution, settlement and financing of various client securities transactions. These activities may expose the Company to credit risk in the event the clients are unable to fulfill their contractual obligations.

Client securities activities are transacted on either a cash or margin basis. In margin transactions, the Company extends credit to the client, subject to various regulatory and internal margin requirements, collateralized by cash and securities in the client’s account. In connection with these activities, the Company also executes and clears client transactions involving the sale of securities not yet purchased (“short sales”). Such margin-related transactions may expose the Company to credit risk in the event a client’s assets are not sufficient to fully cover losses that the client may incur. In the event the client fails to satisfy its obligations, the Company has the authority to purchase or sell financial instruments in the client’s account at prevailing market prices in order to fulfill the client’s obligations. The Company seeks to mitigate the risks associated with its client securities activities by requiring clients to maintain margin collateral in compliance with various regulatory and internal guidelines. The Company monitors required margin levels throughout each trading day and, pursuant to such guidelines, requires clients to deposit additional collateral, or to reduce positions, when necessary.

The Company loans securities temporarily to other broker-dealers in connection with its broker-dealer business. The Company receives cash as collateral for the securities loaned. Increases in securities prices may cause the market value of the securities loaned to exceed the amount of cash received as collateral. In the event the counterparty to these transactions does not return the loaned securities, the Company may be exposed to the risk of acquiring the securities at prevailing market prices in order to satisfy its client obligations. The Company mitigates this risk by requiring credit approvals for counterparties, by monitoring the market value of securities loaned on a daily basis and requiring additional cash as collateral when necessary, and by participating in a risk-sharing program offered through the Options Clearing Corporation (“OCC”).

The Company borrows securities temporarily from other broker-dealers in connection with its broker-dealer business. The Company deposits cash as collateral for the securities borrowed. Decreases in securities prices may cause the market value of the securities borrowed to fall below the amount of cash deposited as collateral. In the event the counterparty to these transactions does not return the cash deposited, the Company may be exposed to the risk of selling the securities at prevailing market prices. The Company mitigates this risk by requiring credit approvals for counterparties, by monitoring the collateral

values on a daily basis and requiring collateral to be returned by the counterparties when necessary, and by participating in a risk-sharing program offered through the OCC.

The Company transacts in reverse repurchase agreements in connection with its broker-dealer business. The Company’s policy is to take possession or control of securities with a market value in excess of the principal amount loaned, plus accrued interest, in order to collateralize resale agreements. The Company monitors the market value of the underlying securities that collateralize the related receivable on resale agreements on a daily basis and may require additional collateral when deemed appropriate.

As of June 30, 2010, client excess margin securities of approximately $10.5 billion and stock borrowings of approximately $0.6 billion were available to the Company to utilize as collateral on various borrowings or for other purposes. The Company had loaned approximately $1.9 billion and repledged approximately $1.2 billion of that collateral as of June 30, 2010.

Guarantees — The Company is a member of and provides guarantees to securities clearinghouses and exchanges. Under related agreements, the Company is generally required to guarantee the performance of other members. Under these agreements, if a member becomes unable to satisfy its obligations to the clearinghouse, other members would be required to meet shortfalls. The Company’s liability under these arrangements is not quantifiable and could exceed the cash and securities it has posted to the clearinghouse as collateral. However, the potential for the Company to be required to make payments under these agreements is considered remote. Accordingly, no contingent liability is carried on the Condensed Consolidated Balance Sheets for these guarantees.

See “Insured Deposit Account Agreement” in Note 11 for a description of a guarantee included in that agreement.

See “Auction Rate Securities Matters” above in this Note 7 for a description of a guarantee that was related to the ARS settlement.

During September 2008, the net asset value of two money market mutual funds held by some of the Company’s clients, the Primary Fund and the International Liquidity Fund, declined below $1.00 per share. These funds are managed by The Reserve, an independent mutual fund company. The Reserve subsequently announced it was suspending redemptions of these funds to effect an orderly liquidation. The Company announced a commitment of up to $55 million to protect its clients’ positions in these funds. In the event the Company’s clients were to receive less than $1.00 per share for these funds upon an orderly liquidation, the Company committed up to $50 million (or $0.03 per share of the fund) for clients in the Primary Fund and up to $5 million for clients in the International Liquidity Fund to mitigate client losses. Based on information from The Reserve and other publicly available information, the Company accrued an estimated fair value of $27.0 million for this obligation as of September 30, 2009, which is included in accounts payable and accrued liabilities on the Condensed Consolidated Balance Sheets. From October 31, 2008 through January 29, 2010, the Primary Fund and the International Liquidity Fund shareholders had received distributions totaling approximately $0.99 per share and $0.86 per share, respectively. In February 2010, the Company fulfilled the guarantee obligation to its clients by paying them for the difference between par value and the distributions to date from these two funds, in exchange for the clients’ shares in the funds. The Company recorded a gain of $0.9 million based on the final fulfillment of the guarantee. The gain is included in gains on money market funds and client guarantees for the nine months ended June 30, 2010, on the Condensed Consolidated Statements of Income.

Employment Agreements — The Company has entered into employment agreements with several of its key executive officers. These employment agreements generally provide for annual base salary and incentive compensation, stock award acceleration and severance payments in the event of termination of employment under certain defined circumstances or changes in control of the Company. Incentive compensation amounts are based on the Company’s financial performance and other factors.

8. FAIR VALUE DISCLOSURES

ASC 820-10, Fair Value Measurements and Disclosures , defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date.

In determining fair value, the Company uses various valuation approaches, including market, income and/or cost approaches. ASC 820-10 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability, developed based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability, developed based on the best information available

in the circumstances. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as follows:

	•		Level 1— Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. This category includes active exchange-traded funds, mutual funds and equity securities.

	•		Level 2— Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Such inputs include quoted prices in markets that are not active, quoted prices for similar assets and liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means. This category includes most debt securities and other interest-sensitive financial instruments.

	•		Level 3 — Unobservable inputs for the asset or liability, where there is little, if any, observable market activity or data for the asset or liability. This category includes assets and liabilities related to money market and other mutual funds managed by The Reserve for which the net asset value has declined below $1.00 per share and the funds are being liquidated. This category also includes auction rate securities for which the periodic auctions have failed.

The following tables present the Company’s fair value hierarchy for assets and liabilities measured on a recurring basis as of June 30, 2010 and September 30, 2009 (dollars in thousands):


	As of June 30, 2010
	Level 1		Level 2		Level 3		Fair Value
Assets:
Short-term investments:
Money market mutual funds	$	—	$	—	$	757	$	757
U.S. government agency debt securities		—		1,096		—		1,096

Subtotal — Short-term investments		—		1,096		757		1,853


Securities owned:
Auction rate securities		—		—		243,287		243,287
Money market and other mutual funds		—		—		11,857		11,857
Equity securities		351		7		—		358
Municipal debt securities		—		1,125		—		1,125
Corporate debt securities		—		534		—		534
Other debt securities		—		57		—		57

Subtotal — Securities owned		351		1,723		255,144		257,218


Other assets:
Interest rate swaps ⁽¹⁾		—		27,963		—		27,963

Total assets at fair value	$	351	$	30,782	$	255,901	$	287,034


Liabilities:
Securities sold, not yet purchased:
Equity securities	$	4,557	$	—	$	—	$	4,557
Municipal debt securities		—		65		—		65
Other debt securities		—		161		—		161

Total — Securities sold, not yet purchased ⁽²⁾	$	4,557	$	226	$	—	$	4,783


(1)		Amount is included in other assets on the Condensed Consolidated Balance Sheets. See “Interest Rate Swaps” in Note 5 for details.

(2)		Amounts are included in accounts payable and accrued liabilities on the Condensed Consolidated Balance Sheets.


	As of September 30, 2009
	Level 1		Level 2		Level 3		Fair Value
Assets:
Short-term investments:
Money market mutual funds	$	—	$	—	$	50,971	$	50,971
U.S. government agency debt securities		—		1,100		—		1,100

Subtotal — Short-term investments		—		1,100		50,971		52,071


Securities owned:
Auction rate securities		—		—		14,579		14,579
Money market and other mutual funds		—		—		5,049		5,049
Equity securities		471		23		—		494
Municipal debt securities		—		2,049		—		2,049
Corporate debt securities		—		702		—		702
Other debt securities		—		532		—		532

Subtotal — Securities owned		471		3,306		19,628		23,405

Total assets at fair value	$	471	$	4,406	$	70,599	$	75,476


Liabilities:
Securities sold, not yet purchased:
Equity securities	$	3,102	$	2	$	—	$	3,104
Money market mutual funds		—		—		1		1
Municipal debt securities		—		118		—		118
Corporate debt securities		—		23		—		23

Total — Securities sold, not yet purchased ⁽¹⁾	$	3,102	$	143	$	1	$	3,246


(1)		Amounts are included in accounts payable and accrued liabilities on the Condensed Consolidated Balance Sheets.

There were no transfers between levels of the fair value hierarchy during the periods presented in the tables below. The following tables present the changes in Level 3 assets and liabilities measured on a recurring basis for the three months and nine months ended June 30, 2010 and 2009 (dollars in thousands):


	Three Months Ended June 30, 2010
						Purchases,
			Net Gains			Sales,
	March 31,		Included in			Issuances and			June 30,
	2010		Earnings			Settlements, Net			2010
Assets:
Short-term investments:
Money market mutual funds	$	—	$	757	⁽¹⁾	$	—		$	757

Securities owned:
Auction rate securities		288,489		1,843	⁽²⁾		(47,045	)		243,287
Money market and other mutual funds		3,873		8,452	⁽¹⁾		(468	)		11,857

Subtotal — Securities owned		292,362		10,295			(47,513	)		255,144

Total assets at fair value	$	292,362	$	11,052		$	(47,513	)	$	255,901


	Nine Months Ended June 30, 2010
						Purchases,
			Net Gains			Sales,
	September 30,		Included in			Issuances and			June 30,
	2009		Earnings			Settlements, Net			2010
Assets:
Short-term investments:
Money market mutual funds	$	50,971	$	1,264	⁽¹⁾	$	(51,478	)	$	757

Securities owned:
Auction rate securities		14,579		2,752	⁽²⁾		225,956			243,287
Money market and other mutual funds		5,049		8,452	⁽¹⁾		(1,644	)		11,857

Subtotal — Securities owned		19,628		11,204			224,312			255,144

Total assets at fair value	$	70,599	$	12,468		$	172,834		$	255,901


(1)		Gains on money market and other mutual funds relate to shares of The Reserve Primary Fund that the Company continues to hold as of June 30, 2010. These gains are included in gains on money market funds and client guarantees on the Condensed Consolidated Statements of Income.

(2)		Net gains on auction rate securities are recorded in other revenues on the Condensed Consolidated Statements of Income and do not relate to assets held as of June 30, 2010.


	Three Months Ended June 30, 2009
			Purchases,
			Sales,
	March 31,		Issuances and			June 30,
	2009		Settlements, Net			2009
Assets:
Short-term investments:
Money market mutual funds	$	77,639	$	(26,668	)	$	50,971

Securities owned:
Auction rate securities		17,925		2,600			20,525
Money market and other mutual funds		5,848		(954	)		4,894

Subtotal — Securities owned		23,773		1,646			25,419


Other investments:
Auction rate securities		8,820		—			8,820

Total assets at fair value	$	110,232	$	(25,022	)	$	85,210


Liabilities:
Securities sold, not yet purchased:
Money market and other mutual funds	$	—	$	2		$	2


	Nine Months Ended June 30, 2009
						Purchases,
			Losses			Sales,
	October 1,		Included in			Issuances and			June 30,
	2008		Earnings			Settlements, Net			2009
Assets:
Cash and cash equivalents ⁽¹⁾	$	217,471	$	—		$	(217,471	)	$	—

Short-term investments:
Money market mutual funds		368,066		(80	)		(317,015	)		50,971

Securities owned:
Auction rate securities		6,925		—			13,600			20,525
Money market and other mutual funds		46,662		—			(41,768	)		4,894

Subtotal — Securities owned		53,587		—			(28,168	)		25,419


Other investments:
Auction rate securities		10,000		—			(1,180	)		8,820

Total assets at fair value	$	649,124	$	(80	)	$	(563,834	)	$	85,210


Liabilities:
Securities sold, not yet purchased:
Money market and other mutual funds	$	4,636	$	—		$	(4,634	)	$	2


(1)		Represents positions in The Reserve Primary Fund that were classified as cash and cash equivalents as of September 30, 2008.

Effective October 1, 2009, the Company adopted ASC 820-10 for nonfinancial assets and liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis. There were no nonfinancial assets or liabilities measured at fair value during the nine months ended June 30, 2010.

Valuation Techniques

In general, and where applicable, the Company uses quoted prices in active markets for identical assets or liabilities to determine fair value. This pricing methodology applies to the Company’s Level 1 assets and liabilities. If quoted prices in active markets for identical assets and liabilities are not available to determine fair value, then the Company uses quoted prices

for similar assets and liabilities or inputs other than the quoted prices that are observable, either directly or indirectly. This pricing methodology applies to the Company’s Level 2 assets and liabilities.

Level 2 Measurements:

Debt Securities — The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields and credit spreads.

Interest Rate Swaps — These derivatives are valued using a model that relies on interest rate yield curves, which are observable for substantially the full term of the contract. The valuation technique underlying the model is widely accepted in the financial services industry and does not involve significant judgment.

Level 3 Measurements:

Money Market and Other Mutual Funds — The fair value of positions in money market and other mutual funds managed by The Reserve is estimated by management based on the underlying portfolio holdings data published by The Reserve.

Auction Rate Securities — ARS are long-term variable rate securities tied to short-term interest rates that are reset through a “Dutch auction” process, which generally occurs every seven to 35 days. Holders of ARS were previously able to liquidate their holdings to prospective buyers by participating in the auctions. During fiscal 2008, the Dutch auction process failed and holders were no longer able to liquidate their holdings through the auction process. The fair value of Company ARS holdings is estimated based on an internal pricing model. The pricing model takes into consideration the characteristics of the underlying securities as well as multiple inputs, including counterparty credit quality, expected timing of redemptions and the yield premium that a market participant would require over otherwise comparable securities to compensate for the illiquidity of the ARS. These inputs require significant management judgment.

Fair Value of Long-Term Debt

As of June 30, 2010, the Company’s Senior Notes had an aggregate estimated fair value, based on quoted market prices, of approximately $1.30 billion, compared to the aggregate carrying value of the Senior Notes on the Condensed Consolidated Balance Sheet of $1.28 billion. As of September 30, 2009, the Company’s Term A and Term B credit facilities had an aggregate estimated fair value, based on quoted market prices, of $1.39 billion, compared to the Condensed Consolidated Balance Sheet carrying value of $1.41 billion.

9. EARNINGS PER SHARE

The following is a reconciliation of the numerator and denominator used in the computation of basic and diluted earnings per share (in thousands, except per share amounts):


	Three Months Ended June 30,				Nine Months Ended June 30,
	2010		2009		2010		2009
Net income	$	179,439	$	170,537	$	478,229	$	486,965


Weighted average shares outstanding — basic		587,086		563,792		588,176		576,420
Effect of dilutive securities:
Stock options		3,875		5,986		4,633		6,128
Restricted stock units		2,593		1,887		2,313		1,978
Deferred compensation shares		93		107		99		97


Weighted average shares outstanding — diluted		593,647		571,772		595,221		584,623


Earnings per share — basic	$	0.31	$	0.30	$	0.81	$	0.84
Earnings per share — diluted	$	0.30	$	0.30	$	0.80	$	0.83

10. COMPREHENSIVE INCOME

Comprehensive income is as follows (dollars in thousands):


	Three Months Ended June 30,						Nine Months Ended June 30,
	2010			2009			2010			2009
Net income	$	179,439		$	170,537		$	478,229		$	486,965

Other comprehensive income (loss):
Net unrealized gains (losses) on investment securities available-for-sale		5			640			—			(481	)
Adjustment for deferred income taxes on net unrealized losses (gains)		—			(227	)		—			182
Reclassification adjustment for realized losses on investment securities included in net income		—			2,088			—			2,088
Reclassification adjustment for deferred income taxes on realized investment losses		—			(758	)		—			(758	)
Foreign currency translation adjustment		(42	)		200			(6	)		(257	)

Total other comprehensive income (loss), net of tax		(37	)		1,943			(6	)		774

Comprehensive income	$	179,402		$	172,480		$	478,223		$	487,739

11. RELATED PARTY TRANSACTIONS

Transactions with TD and Affiliates

As a result of the acquisition of TD Waterhouse during fiscal 2006, TD became an affiliate of the Company. TD owned approximately 45.9% of the Company’s common stock as of June 30, 2010, of which 45% is permitted to be voted under the terms of the Stockholders Agreement among TD, the Company and certain other stockholders. Pursuant to the Stockholders Agreement, TD has the right to designate five of twelve members to the Company’s board of directors. The Company transacts business and has extensive relationships with TD and certain of its affiliates. A description of significant transactions with TD and its affiliates is set forth below.

Insured Deposit Account Agreement

The Company is party to an insured deposit account (“IDA”) agreement (formerly known as the money market deposit account or “MMDA” agreement) with TD Bank USA, N.A. (“TD Bank USA”), TD Bank, N.A., (“TD Bank”, and together with TD Bank USA, the “Depository Institutions”) and TD. Under the IDA agreement, the Depository Institutions make available to clients of the Company FDIC-insured money market deposit accounts as either designated sweep vehicles or as non-sweep deposit accounts. The Company provides marketing, recordkeeping and support services for the Depository Institutions with respect to the money market deposit accounts. In exchange for providing these services, the Depository Institutions pay the Company a fee based on the yield earned on the client IDA assets, less the actual interest paid to clients, a flat fee to TD Bank USA of 25 basis points and the cost of FDIC insurance premiums.

The IDA agreement has a term of five years beginning July 1, 2008, and is automatically renewable for successive five-year terms, provided that it may be terminated by any party upon two years’ prior written notice. The agreement provides that the fee earned on the IDA agreement is calculated based on three primary components: (a) the actual yield earned on investments in place as of July 1, 2008, which were primarily fixed-income securities backed by Canadian government guarantees, (b) the yield on other fixed-rate investments, based on prevailing fixed rates for identical balances and maturities in the interest rate swap market (generally LIBOR-based) at the time such investments were added to the IDA portfolio and (c) floating-rate investments, based on the monthly average rate for 30-day LIBOR. The agreement provides that, from time to time, the Company may request amounts and maturity dates for the other fixed-rate investments (component (b) above) in the IDA portfolio, subject to the approval of the Depository Institutions. For the month of June 2010, the IDA portfolio was comprised of approximately 10% component (a) investments, 82% component (b) investments and 8% component (c) investments.

In the event the fee computation results in a negative amount, the Company must pay the Depository Institutions the negative amount. This effectively results in the Company guaranteeing the Depository Institutions revenue of 25 basis points on the IDA agreement, plus the reimbursement of FDIC insurance premiums. The fee computation under the IDA agreement is

affected by many variables, including the type, duration, credit quality, principal balance and yield of the investment portfolio at the Depository Institutions, the prevailing interest rate environment, the amount of client deposits and the yield paid on client deposits. Because a negative IDA fee computation would arise only if there were extraordinary movements in many of these variables, the maximum potential amount of future payments the Company could be required to make under this arrangement cannot be reasonably estimated. Management believes the potential for the fee calculation to result in a negative amount is remote and the fair value of the guarantee is not material. Accordingly, no contingent liability is carried on the Condensed Consolidated Balance Sheets for the IDA agreement.

The Company earned fee income associated with the insured deposit account agreement of $180.1 million and $505.4 million for the three months and nine months ended June 30, 2010, respectively, and $125.1 million and $424.9 million for the three months and nine months ended June 30, 2009, respectively, which is reported as insured deposit account fees on the Condensed Consolidated Statements of Income.

Mutual Fund Agreements

The Company and an affiliate of TD are parties to a sweep fund agreement, transfer agency agreement, shareholder services agreement and a dealer agreement pursuant to which certain mutual funds are made available as money market sweep or direct purchase options to Company clients. The Company performs certain distribution and marketing support services with respect to those funds. In consideration for offering the funds and performing the distribution and marketing support services, an affiliate of TD compensates the Company in accordance with the provisions of the sweep fund agreement. The Company also performs certain services for the applicable fund and earns fees for those services. The agreement may be terminated by any party upon one year’s prior written notice and may be terminated by the Company upon 30 days’ prior written notice under certain circumstances. The Company earned fee income associated with these agreements of $2.3 million and $6.3 million for the three months and nine months ended June 30, 2010, respectively, and $19.0 million and $102.0 million for the three months and nine months ended June 30, 2009, respectively, which is included in investment product fees on the Condensed Consolidated Statements of Income.

Securities Borrowing and Lending

In connection with its brokerage business, the Company engages in securities borrowing and lending with TD Securities, Inc. (“TDSI”), an affiliate of TD. Receivable from brokers, dealers and clearing organizations includes $0.4 million and $0.6 million of receivables from TDSI as of June 30, 2010 and September 30, 2009, respectively. Payable to brokers, dealers and clearing organizations includes $19.9 million and $34.0 million of payables to TDSI as of June 30, 2010 and September 30, 2009, respectively. The Company earned net interest revenue of $0.4 million and $1.1 million for the three months and nine months ended June 30, 2010, respectively, and earned net interest revenue of $0.2 million and incurred net interest expense of $0.2 million for the three months and nine months ended June 30, 2009, respectively, associated with securities borrowing and lending with TDSI. The transactions with TDSI are subject to similar collateral requirements as transactions with other counterparties.

Referral and Strategic Alliance Agreement

TDA Inc. is a party to a referral and strategic alliance agreement with TD Bank and TD Wealth Management Services, Inc. (“TDWMS”). Under the agreement, TD Bank will promote TDA Inc.’s brokerage services to its clients using a variety of marketing and referral programs and TDWMS referred its existing brokerage account clients to TDA Inc. while TDWMS discontinued its brokerage operations. TD Bank clients that open brokerage accounts at TDA Inc. and TDWMS clients that elected to transfer their accounts to TDA Inc. are considered program clients. TDA Inc. retains a fee for providing brokerage services to the program clients, and the program’s net margin is shared equally between TDA Inc. and TD Bank. The Company earned pre-tax income associated with the referral and strategic alliance agreement of $0.3 million and $0.2 million for the three months and nine months ended June 30, 2010, respectively.

Cash Management Services Agreement

Pursuant to a cash management services agreement, TD Bank USA provides cash management services to clients of TDA Inc. In exchange for such services, the Company pays TD Bank USA service-based fees agreed upon by the parties. The Company incurred expense associated with the cash management services agreement of $0.2 million for the three months ended June 30, 2010 and 2009 and $0.6 million for the nine months ended June 30, 2010 and 2009, which is included in clearing and execution costs on the Condensed Consolidated Statements of Income. The cash management services agreement will continue in effect for as long as the IDA agreement remains in effect, provided that it may be terminated by TDA Inc. without cause upon 60 days’ prior written notice to TD Bank USA.

Indemnification Agreement for Phantom Stock Plan Liabilities

Pursuant to an indemnification agreement, the Company agreed to assume TD Waterhouse liabilities related to the payout of awards under The Toronto-Dominion Bank 2002 Phantom Stock Incentive Plan following the completion of the TD Waterhouse acquisition. Under this plan, participants were granted units of stock appreciation rights (“SARs”) based on TD’s common stock that generally vest over four years. Upon exercise, the participant receives cash representing the appreciated value of the units between the grant date and the redemption date. In connection with the payout of awards under the 2002 Phantom Stock Incentive Plan, TD Discount Brokerage Holdings LLC (“TDDBH”), a wholly-owned subsidiary of TD, agreed to indemnify the Company for any liabilities incurred by the Company in excess of the provision for such liability included on the closing date balance sheet of TD Waterhouse. In addition, in the event that the liability incurred by the Company in connection with the 2002 Phantom Stock Incentive Plan is less than the provision for such liability included on the closing date balance sheet of TD Waterhouse, the Company agreed to pay the difference to TDDBH. There were 25,815 and 43,590 SARs outstanding as of June 30, 2010 and September 30, 2009, respectively, with an approximate value of $1.0 million and $1.6 million, respectively. The indemnification agreement effectively protects the Company against fluctuations in TD’s common stock price with respect to the SARs, so there will be no net effect on the Company’s results of operations resulting from such fluctuations.

Canadian Call Center Services Agreement

Pursuant to the Canadian call center services agreement, TD receives and services client calls at its London, Ontario site for clients of TDA Inc. After May 1, 2013, either party may terminate this agreement without cause and without penalty by providing 24 months’ prior written notice. In consideration of the performance by TD of the call center services, the Company pays TD, on a monthly basis, an amount approximately equal to TD’s monthly cost. The Company incurred expenses associated with the Canadian call center services agreement of $4.4 million and $13.1 million for the three months and nine months ended June 30, 2010, respectively, and $4.0 million and $11.8 million for the three months and nine months ended June 30, 2009, respectively, which is included in professional services expense on the Condensed Consolidated Statements of Income.

Certificates of Deposit Brokerage Agreement

TDA, Inc. is party to a certificates of deposit brokerage agreement with TD Bank USA, under which TDA Inc. acts as agent for its clients in purchasing certificates of deposit from TD Bank USA. Under the agreement, TD Bank USA pays TDA Inc. a placement fee for each certificate of deposit issued in an amount agreed to by both parties. TDA Inc. has periodically promoted limited time offers to purchase a three-month TD Bank USA certificate of deposit with a premium yield to clients that made a deposit or transferred $25,000 into their TDA Inc. brokerage account during a specified time period. Under these promotions, TDA Inc. reimburses TD Bank USA for the subsidized portion of the premium yield paid to its clients. The Company incurred net costs to TD Bank USA associated with this promotional offer of $0 and $2.3 million for the three months and nine months ended June 30, 2010, respectively, and $0 and $3.3 million for the three months and nine months ended June 30, 2009, which is included in advertising expense on the Condensed Consolidated Statements of Income.

Sale of thinkorswim Canada, Inc. and Trading Platform Hosting and Services Agreement

On June 11, 2009, immediately following the closing of the thinkorswim acquisition, the Company completed the sale of thinkorswim Canada, Inc. (“thinkorswim Canada”) to TD Waterhouse Canada Inc. (“TDW Canada”), a wholly-owned subsidiary of TD, for cash equal to the total tangible equity of thinkorswim Canada immediately prior to the closing of the transaction. The Company received gross proceeds from the sale of approximately $1.7 million. The Company did not recognize a gain or loss on the sale of thinkorswim Canada.

In connection with the sale of thinkorswim Canada, the Company and TDW Canada entered into a trading platform hosting and services agreement. The agreement has an initial term of five years beginning June 11, 2009, and will automatically renew for additional periods of two years, unless either party provides notice of non-renewal to the other party at least 90 days prior to the end of the then-current term. Because this agreement represents contingent consideration to be paid for the sale of thinkorswim Canada, the Company recorded a $10.7 million receivable for the fair value of this agreement. Under this agreement, TDW Canada uses the thinkorswim trading platform and TDA Inc. provides the services to support the platform. In consideration for the performance by TDA Inc. of all its obligations under this agreement, TDW Canada pays TDA Inc., on a monthly basis, a fee based on average client trades per day and transactional revenues. Fees earned under the agreement are recorded as a reduction of the contingent consideration receivable until the receivable is reduced to zero, and thereafter will

be recorded as fee revenue. As of June 30, 2010 and September 30, 2009, $9.9 million and $10.4 million, respectively, of contingent consideration is included in receivable from affiliates on the Condensed Consolidated Balance Sheets.

Other Related Party Transactions

TD Options LLC, a subsidiary of TD, paid the Company the amount of exchange-sponsored payment for order flow that it received for routing TDA Inc. client orders to the exchanges. The Company earned $0 and $0.5 million of payment for order flow revenues from TD Options LLC for the three months and nine months ended June 30, 2010, respectively, and $1.7 million and $3.3 million for the three months and nine months ended June 30, 2009, respectively, which is included in commissions and transaction fees on the Condensed Consolidated Statements of Income.

TD Securities (USA) LLC, an indirect wholly-owned subsidiary of TD, was the joint lead manager and participated as an underwriter in the Company’s offering of $1.25 billion of Senior Notes in November 2009. In this capacity, TD Securities (USA) LLC earned a discount and commission of $0.5 million. This amount is being accounted for as part of the debt issuance costs included in other assets on the Condensed Consolidated Balance Sheets and is being amortized to interest expense over the terms of the respective Senior Notes.

Except as otherwise indicated, receivables from and payables to TD and affiliates of TD resulting from the related party transactions described above are included in receivable from affiliates and payable to affiliates, respectively, on the Condensed Consolidated Balance Sheets. Receivables from and payables to TD affiliates resulting from client cash sweep activity are generally settled in cash the next business day. Other receivables from and payables to affiliates of TD are generally settled in cash on a monthly basis.

12. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Senior Notes are jointly and severally and fully and unconditionally guaranteed by TDAOH. Presented below is condensed consolidating financial information for the Company, its guarantor subsidiary and its non-guarantor subsidiaries for the periods indicated.

TD AMERITRADE HOLDING CORPORATION

CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 2010
(Unaudited)
(In thousands)


			Guarantor		Non-Guarantor
	Parent		Subsidiary		Subsidiaries		Eliminations			Total
ASSETS
Cash and cash equivalents	$	13,753	$	23,402	$	679,308	$	—		$	716,463
Cash and investments segregated in compliance with federal regulations		—		—		489,930		—			489,930
Receivable from brokers, dealers and clearing organizations		—		—		782,055		—			782,055
Receivable from clients, net of allowance for doubtful accounts		—		—		7,531,315		—			7,531,315
Investments in subsidiaries		5,294,922		4,846,608		548,738		(10,690,268	)		—
Receivable from affiliates		1,000		218,839		77,198		(219,549	)		77,488
Goodwill		—		—		2,467,223		—			2,467,223
Acquired intangible assets		—		145,674		1,003,325		—			1,148,999
Other		71,123		1,449		671,251		(25,058	)		718,765

Total assets	$	5,380,798	$	5,235,972	$	14,250,343	$	(10,934,875	)	$	13,932,238


LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Payable to brokers, dealers and clearing organizations	$	—	$	—	$	1,973,822	$	—		$	1,973,822
Payable to clients		—		—		5,896,317		—			5,896,317
Accounts payable and accrued liabilities		133,040		15,671		351,990		—			500,701
Payable to affiliates		139,197		2,867		81,181		(219,549	)		3,696
Long-term debt		1,276,672		—		4,261		—			1,280,933
Other		—		41,742		428,196		(25,058	)		444,880

Total liabilities		1,548,909		60,280		8,735,767		(244,607	)		10,100,349

Stockholders’ equity		3,831,889		5,175,692		5,514,576		(10,690,268	)		3,831,889

Total liabilities and stockholders’ equity	$	5,380,798	$	5,235,972	$	14,250,343	$	(10,934,875	)	$	13,932,238

TD AMERITRADE HOLDING CORPORATION

CONDENSED CONSOLIDATING BALANCE SHEET
AS OF SEPTEMBER 30, 2009
(Unaudited)
(In thousands)


			Guarantor		Non-Guarantor
	Parent		Subsidiary		Subsidiaries		Eliminations			Total

ASSETS
Cash and cash equivalents	$	45,291	$	109,079	$	636,841	$	—		$	791,211
Cash and investments segregated in compliance with federal regulations		—		—		5,813,862		—			5,813,862
Receivable from brokers, dealers and clearing organizations		—		—		1,777,741		—			1,777,741
Receivable from clients, net of allowance for doubtful accounts		—		—		5,712,261		—			5,712,261
Investments in subsidiaries		5,298,879		4,145,057		—		(9,443,936	)		—
Receivable from affiliates		2,140		220,654		91,839		(221,659	)		92,974
Goodwill		—		—		2,472,098		—			2,472,098
Acquired intangible assets		—		145,674		1,079,048		—			1,224,722
Other		44,877		50,501		426,131		(34,568	)		486,941

Total assets	$	5,391,187	$	4,670,965	$	18,009,821	$	(9,700,163	)	$	18,371,810


LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Payable to brokers, dealers and clearing organizations	$	—	$	—	$	2,491,617	$	—		$	2,491,617
Payable to clients		—		—		9,914,823		—			9,914,823
Accounts payable and accrued liabilities		272,510		22,217		406,059		—			700,786
Payable to affiliates		160,894		2,324		62,165		(221,659	)		3,724
Long-term debt		1,406,500		—		8,400		—			1,414,900
Other		—		41,700		287,545		(34,568	)		294,677

Total liabilities		1,839,904		66,241		13,170,609		(256,227	)		14,820,527

Stockholders’ equity		3,551,283		4,604,724		4,839,212		(9,443,936	)		3,551,283

Total liabilities and stockholders’ equity	$	5,391,187	$	4,670,965	$	18,009,821	$	(9,700,163	)	$	18,371,810

TD AMERITRADE HOLDING CORPORATION

CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED JUNE 30, 2010
(Unaudited)
(In thousands)


				Guarantor			Non-Guarantor
	Parent			Subsidiary			Subsidiaries		Eliminations			Total
Net revenues	$	4,727		$	41		$	691,780	$	(4,744	)	$	691,804
Operating expenses		4,133			(733	)		392,887		(4,744	)		391,543

Operating income		594			774			298,893		—			300,261
Other expense		10,953			—			244		—			11,197

Income (loss) before income taxes and equity in income of subsidiaries		(10,359	)		774			298,649		—			289,064
Provision for (benefit from) income taxes		(3,348	)		281			112,692		—			109,625

Income (loss) before equity in income of subsidiaries		(7,011	)		493			185,957		—			179,439
Equity in income of subsidiaries		186,450			183,438			2,718		(372,606	)		—

Net income	$	179,439		$	183,931		$	188,675	$	(372,606	)	$	179,439

TD AMERITRADE HOLDING CORPORATION

CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED JUNE 30, 2009
(Unaudited)
(In thousands)


				Guarantor			Non-Guarantor
	Parent			Subsidiary			Subsidiaries		Eliminations			Total
Net revenues	$	6,399		$	239		$	613,548	$	(6,418	)	$	613,768
Operating expenses		7,818			37			322,217		(6,418	)		323,654

Operating income (loss)		(1,419	)		202			291,331		—			290,114
Other expense		7,999			2,003			366		—			10,368

Income (loss) before income taxes and equity in income of subsidiaries		(9,418	)		(1,801	)		290,965		—			279,746
Provision for (benefit from) income taxes		(1,597	)		(660	)		111,466		—			109,209

Income (loss) before equity in income of subsidiaries		(7,821	)		(1,141	)		179,499		—			170,537
Equity in income of subsidiaries		178,358			179,335			—		(357,693	)		—

Net income	$	170,537		$	178,194		$	179,499	$	(357,693	)	$	170,537

TD AMERITRADE HOLDING CORPORATION

CONDENSED CONSOLIDATING STATEMENT OF INCOME
NINE MONTHS ENDED JUNE 30, 2010
(Unaudited)
(In thousands)


				Guarantor			Non-Guarantor
	Parent			Subsidiary			Subsidiaries		Eliminations			Total

Net revenues	$	12,077		$	122		$	1,951,806	$	(12,149	)	$	1,951,856
Operating expenses		8,642			(1,164	)		1,188,399		(12,149	)		1,183,728

Operating income		3,435			1,286			763,407		—			768,128
Other expense		41,234			—			922		—			42,156

Income (loss) before income taxes and equity in income of subsidiaries		(37,799	)		1,286			762,485		—			725,972
Provision for (benefit from) income taxes		(33,969	)		(4,047	)		285,759		—			247,743

Income (loss) before equity in income of subsidiaries		(3,830	)		5,333			476,726		—			478,229
Equity in income of subsidiaries		482,059			465,968			2,718		(950,745	)		—

Net income	$	478,229		$	471,301		$	479,444	$	(950,745	)	$	478,229

TD AMERITRADE HOLDING CORPORATION

CONDENSED CONSOLIDATING STATEMENT OF INCOME
NINE MONTHS ENDED JUNE 30, 2009
(Unaudited)
(In thousands)


				Guarantor			Non-Guarantor
	Parent			Subsidiary			Subsidiaries		Eliminations			Total

Net revenues	$	21,878		$	1,038		$	1,749,150	$	(22,070	)	$	1,749,996
Operating expenses		20,551			278			912,303		(21,953	)		911,179

Operating income		1,327			760			836,847		(117	)		838,817
Other expense		31,922			2,120			324		(117	)		34,249

Income (loss) before income taxes and equity in income of subsidiaries		(30,595	)		(1,360	)		836,523		—			804,568
Provision for (benefit from) income taxes		(5,249	)		641			322,211		—			317,603

Income (loss) before equity in income of subsidiaries		(25,346	)		(2,001	)		514,312		—			486,965
Equity in income of subsidiaries		512,311			514,148			—		(1,026,459	)		—

Net income	$	486,965		$	512,147		$	514,312	$	(1,026,459	)	$	486,965

TD AMERITRADE HOLDING CORPORATION

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 2010
(Unaudited)
(In thousands)


				Guarantor			Non-Guarantor
	Parent			Subsidiary			Subsidiaries			Total

Net cash provided by (used in) operating activities	$	(125,867	)	$	(67	)	$	468,675		$	342,741

Cash flows from investing activities:
Purchase of property and equipment		—			—			(61,180	)		(61,180	)
Proceeds from redemption of money market funds		108			49,390			1,980			51,478
Other		—			—			2			2

Net cash provided by (used in) investing activities		108			49,390			(59,198	)		(9,700	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt		1,248,557			—			—			1,248,557
Payment of debt issuance costs		(10,595	)		—			—			(10,595	)
Principal payments on long-term debt		(1,406,500	)		—			(4,138	)		(1,410,638	)
Purchase of treasury stock		(248,188	)		—			—			(248,188	)
Other		24,937			—			(11,853	)		13,084

Net cash used in financing activities		(391,789	)		—			(15,991	)		(407,780	)

Intercompany investing and financing activities, net		486,010			(135,000	)		(351,010	)		—
Effect of exchange rate changes on cash and cash equivalents		—			—			(9	)		(9	)

Net increase (decrease) in cash and cash equivalents		(31,538	)		(85,677	)		42,467			(74,748	)
Cash and cash equivalents at beginning of period		45,291			109,079			636,841			791,211

Cash and cash equivalents at end of period	$	13,753		$	23,402		$	679,308		$	716,463

TD AMERITRADE HOLDING CORPORATION

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 2009
(Unaudited)
(In thousands)


				Guarantor			Non-Guarantor
	Parent			Subsidiary			Subsidiaries			Total

Net cash provided by (used in) operating activities	$	139,299		$	(158,682	)	$	914,240		$	894,857

Cash flows from investing activities:
Purchase of property and equipment		—			—			(45,799	)		(45,799	)
Cash and cash equivalents acquired in business combinations		—			—			86,423			86,423
Cash paid in business combinations		(225,447	)		(41,266	)		—			(266,713	)
Proceeds from redemption of money market funds		667			177,206			139,142			317,015
Other		—			2,868			180			3,048

Net cash provided by (used in) investing activities		(224,780	)		138,808			179,946			93,974

Cash flows from financing activities:
Principal payments on long-term debt		(28,125	)		—			(74,000	)		(102,125	)
Purchase of treasury stock		(465,452	)		—			—			(465,452	)
Other		27,074			—			(2,263	)		24,811

Net cash used in financing activities		(466,503	)		—			(76,263	)		(542,766	)

Intercompany investing and financing activities, net		560,831			(51,201	)		(509,630	)		—
Effect of exchange rate changes on cash and cash equivalents		—			—			(376	)		(376	)

Net increase (decrease) in cash and cash equivalents		8,847			(71,075	)		507,917			445,689
Cash and cash equivalents at beginning of period		989			171,010			502,136			674,135

Cash and cash equivalents at end of period	$	9,836		$	99,935		$	1,010,053		$	1,119,824

Item 2. — Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the Selected Financial Data and the Consolidated Financial Statements and Notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2009, and the Condensed Consolidated Financial Statements and Notes thereto contained in this quarterly report on Form 10-Q.

This discussion contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend” and similar expressions. In particular, forward-looking statements contained in this discussion include our expectations regarding: the effect of client trading activity on our results of operations; the effect of changes in interest rates on our net interest spread; average commissions and transaction fees per trade; amounts of commissions and transaction fees, asset-based revenues and other revenues; our migration of client cash balances into the insured deposit account offering; amounts of total operating expenses; our effective income tax rate; our capital and liquidity needs and our plans to finance such needs; and the impact of recently issued accounting pronouncements.

The Company’s actual results could differ materially from those anticipated in such forward-looking statements. Important factors that may cause such differences include, but are not limited to: general economic and political conditions; interest rates; stock market fluctuations and changes in client trading activity; increased competition; systems failures and capacity constraints; network security risks; ability to service debt obligations; ability to achieve the benefits of the thinkorswim Group Inc. (“thinkorswim”) acquisition; regulatory and legal matters and uncertainties and the other risks and uncertainties set forth under Item 1A. — Risk Factors of the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2009. The forward-looking statements contained in this report speak only as of the date on which the statements were made. We undertake no obligation to publicly update or revise these statements, whether as a result of new information, future events or otherwise.

The preparation of our financial statements requires us to make judgments and estimates that may have a significant impact upon our financial results. Note 1 of our Notes to Consolidated Financial Statements for the fiscal year ended September 30,

2009, contains a summary of our significant accounting policies, many of which require the use of estimates and assumptions. We believe that the following areas are particularly subject to management’s judgments and estimates and could materially affect our results of operations and financial position: valuation of goodwill and acquired intangible assets; valuation of stock-based compensation; estimates of effective income tax rates, deferred income taxes and related valuation allowances; and valuation of guarantees. These areas are discussed in further detail under the heading “Critical Accounting Policies and Estimates” in Item 7 of our annual report on Form 10-K for the fiscal year ended September 30, 2009.

Unless otherwise indicated, the terms “we,” “us” or “Company” in this report refer to TD AMERITRADE Holding Corporation and its wholly-owned subsidiaries. The term “GAAP” refers to U.S. generally accepted accounting principles.

GLOSSARY OF TERMS

In discussing and analyzing our business, we utilize several metrics and other terms that are defined in a Glossary of Terms that is available on our website at www.amtd.com (in the “Investors” section under the heading “Financial Reports”) and is included in Item 7 of our annual report on Form 10-K for the fiscal year ended September 30, 2009. Since the issuance of our Form 10-K, the definition of “EBITDA and EBITDA excluding investment gains/losses” has been updated and the definition of “Expenses excluding advertising” has been replaced with “Operating expenses excluding advertising.” These updated definitions are as follows:

EBITDA and EBITDA excluding investment gains/losses — EBITDA (earnings before interest, taxes, depreciation and amortization) and EBITDA excluding investment gains/losses are non-GAAP financial measures. We consider EBITDA and EBITDA excluding investment gains/losses to be important measures of our financial performance and of our ability to generate cash flows to service debt, fund capital expenditures and fund other corporate investing and financing activities. EBITDA is used as the denominator in the consolidated leverage ratio calculation for covenant purposes under our senior revolving credit facility. EBITDA eliminates the non-cash effect of tangible asset depreciation and amortization and intangible asset amortization. EBITDA excluding investment gains/losses also eliminates the effect of non-brokerage investment-related gains and losses that are not likely to be indicative of the ongoing operations of our business. EBITDA and EBITDA excluding investment gains/losses should be considered in addition to, rather than as a substitute for, pre-tax income, net income and cash flows from operating activities.

Operating expenses excluding advertising — Operating expenses excluding advertising is a non-GAAP financial measure. Operating expenses excluding advertising consists of total operating expenses, adjusted to remove advertising expense. We consider operating expenses excluding advertising an important measure of the financial performance of our ongoing business. Advertising spending is excluded because it is largely at the discretion of the Company, varies significantly from period to period based on market conditions and generally relates to the acquisition of future revenues through new accounts rather than current revenues from existing accounts. Operating expenses excluding advertising should be considered in addition to, rather than as a substitute for, total operating expenses.

RESULTS OF OPERATIONS

Conditions in the U.S. equity markets significantly impact the volume of our clients’ trading activity. There is a direct correlation between the volume of our clients’ trading activity and our results of operations. We cannot predict future trading volumes in the U.S. equity markets. If client trading activity increases, we expect that it would have a positive impact on our results of operations. If client trading activity declines, we expect that it would have a negative impact on our results of operations.

Changes in average balances, especially client margin, credit, insured deposit account and mutual fund balances, may significantly impact our results of operations. Changes in interest rates also impact our results of operations. We seek to mitigate interest rate risk by aligning the average duration of our interest-earning assets with that of our interest-bearing liabilities. We cannot predict the direction of interest rates or the levels of client balances. If interest rates rise, we generally expect to earn a larger net interest spread. Conversely, a falling interest rate environment generally would result in our earning a smaller net interest spread.

Financial Performance Metrics

Pre-tax income, net income, earnings per share and EBITDA (earnings before interest, taxes, depreciation and amortization) are key metrics we use in evaluating our financial performance. EBITDA is a non-GAAP financial measure.

We consider EBITDA an important measure of our financial performance and of our ability to generate cash flows to service debt, fund capital expenditures and fund other corporate investing and financing activities. EBITDA is used as the denominator in the consolidated leverage ratio calculation for covenant purposes under our senior revolving credit facility.

EBITDA eliminates the non-cash effect of tangible asset depreciation and amortization and intangible asset amortization. EBITDA should be considered in addition to, rather than as a substitute for, pre-tax income, net income and cash flows from operating activities.

The following table sets forth EBITDA in dollars and as a percentage of net revenues for the periods indicated and provides reconciliations to net income, which is the most directly comparable GAAP measure (dollars in thousands):


	Three months ended June 30,												Nine months ended June 30,
	2010						2009						2010						2009
				% of Net						% of Net						% of Net						% of Net
	$			Revenue			$			Revenue			$			Revenue			$			Revenue
EBITDA
EBITDA	$	339,879			49.1	%	$	316,824			51.6	%	$	877,031			44.9	%	$	918,402			52.5	%
Less:
Depreciation and amortization		(14,499	)		(2.1	%)		(11,162	)		(1.8	%)		(41,573	)		(2.1	%)		(33,299	)		(1.9	%)
Amortization of acquired intangible assets		(25,119	)		(3.6	%)		(17,551	)		(2.9	%)		(75,722	)		(3.9	%)		(48,289	)		(2.8	%)
Interest on borrowings		(11,197	)		(1.6	%)		(8,365	)		(1.4	%)		(33,764	)		(1.7	%)		(32,246	)		(1.8	%)
Provision for income taxes		(109,625	)		(15.8	%)		(109,209	)		(17.8	%)		(247,743	)		(12.7	%)		(317,603	)		(18.1	%)

Net income	$	179,439			25.9	%	$	170,537			27.8	%	$	478,229			24.5	%	$	486,965			27.8	%

Our EBITDA decreased for the first nine months of fiscal 2010 compared to the first nine months of fiscal 2009 primarily due to (1) lower net interest margin earned on spread-based balances and investment product fees waived on money market mutual funds due to the near-zero short-term interest rate environment, (2) a 7% decrease in average client trades per day on a pro forma combined basis including results of thinkorswim (thinkorswim was acquired during the third quarter of fiscal 2009), and (3) higher incentive-based compensation related to our success in attracting net new client assets. These factors were partially offset by the favorable revenue impact of an 83% increase in average spread-based balances for the first nine months of fiscal 2010 compared to the first nine months of fiscal 2009. Detailed analysis of net revenues and expenses is presented later in this discussion.

Operating Metrics

Our largest sources of revenues are asset-based revenues and transaction-based revenues. For the nine months ended June 30, 2010, asset-based revenues and transaction-based revenues accounted for 47% and 48% of our net revenues, respectively. Asset-based revenues consist of (1) net interest revenue, (2) insured deposit account fees and (3) investment product fees. The primary factors driving our asset-based revenues are average balances and average rates. Average balances consist primarily of average client margin balances, average segregated cash balances, average client credit balances, average client insured deposit account balances, average fee-based investment balances and average securities borrowing and lending balances. Average rates consist of the average interest rates and fees earned and paid on such balances. The primary factors driving our transaction-based revenues are total client trades and average commissions and transaction fees per trade. We also consider client account and client asset metrics, although we believe they are generally of less significance to our results of operations for any particular period than our metrics for asset-based and transaction-based revenues.

Asset-Based Revenue Metrics

We calculate the return on our interest-earning assets (excluding conduit-based assets) and our insured deposit account balances using a measure we refer to as net interest margin. Net interest margin is calculated for a given period by dividing the annualized sum of net interest revenue (excluding net interest revenue from conduit-based assets) and insured deposit account fees by average spread-based assets. Spread-based assets consist of client and brokerage-related asset balances, including client margin balances, segregated cash, insured deposit account balances, deposits paid on securities borrowing (excluding conduit-based assets) and other cash and interest-earning investment balances. The following table sets forth net interest margin and average spread-based assets (dollars in millions):


	Three months ended									Nine months ended
	June 30,						Increase/			June 30,						Increase/
	2010			2009			(Decrease)			2010			2009			(Decrease)

Avg. interest-earning assets (excluding conduit business)	$	12,565		$	10,002		$	2,563		$	13,692		$	8,296		$	5,396
Avg. insured deposit account balances		41,811			22,474			19,337			37,873			19,876			17,997

Avg. spread-based balances	$	54,376		$	32,476		$	21,900		$	51,565		$	28,172		$	23,393


Net interest revenue (excluding conduit business)	$	111.2		$	98.2		$	13.0		$	310.2		$	247.1		$	63.1
Insured deposit account fee revenue		180.1			125.1			55.0			505.4			424.9			80.5

Spread-based revenue	$	291.3		$	223.3		$	68.0		$	815.6		$	672.0		$	143.6


Avg. annualized yield — interest- earning assets (excluding conduit business)		3.50	%		3.88	%		(0.38	%)		2.99	%		3.93	%		(0.94	%)
Avg. annualized yield — insured deposit account fees		1.70	%		2.20	%		(0.50	%)		1.76	%		2.82	%		(1.06	%)
Net interest margin (NIM)		2.12	%		2.72	%		(0.60	%)		2.09	%		3.15	%		(1.06	%)

The following tables set forth key metrics that we use in analyzing net interest revenue, which, exclusive of the conduit business, is a component of net interest margin (dollars in millions):


	Interest Revenue (Expense)									Interest Revenue (Expense)
	Three months ended									Nine months ended
	June 30,						Increase/			June 30,						Increase/
	2010			2009			(Decrease)			2010			2009			(Decrease)
Segregated cash	$	1.1		$	1.5		$	(0.4	)	$	5.2		$	3.8		$	1.4
Client margin balances		89.1			54.7			34.4			242.1			169.2			72.9
Securities borrowing (excluding conduit business)		21.7			42.9			(21.2	)		65.6			76.3			(10.7	)
Other cash and interest-earning investments, net		0.3			0.4			(0.1	)		0.7			3.3			(2.6	)
Client credit balances		(0.6	)		(0.7	)		0.1			(2.4	)		(3.0	)		0.6
Securities lending (excluding conduit business)		(0.4	)		(0.6	)		0.2			(1.0	)		(2.5	)		1.5

Net interest revenue (excluding conduit business)		111.2			98.2			13.0			310.2			247.1			63.1

Securities borrowing — conduit business		0.4			1.5			(1.1	)		1.4			10.1			(8.7	)
Securities lending — conduit business		(0.2	)		(1.1	)		0.9			(0.8	)		(6.3	)		5.5

Net interest revenue	$	111.4		$	98.6		$	12.8		$	310.8		$	250.9		$	59.9


	Average Balance							Average Balance
	Three months ended							Nine months ended
	June 30,				%			June 30,				%
	2010		2009		Change			2010		2009		Change
Segregated cash	$	3,416	$	4,159		(18	%)	$	5,266	$	2,599		103	%
Client margin balances		7,531		4,340		74	%		6,783		4,240		60	%
Securities borrowing (excluding conduit business)		446		583		(23	%)		560		381		47	%
Other cash and interest-earning investments		1,172		920		27	%		1,083		1,076		1	%

Interest-earning assets (excluding conduit business)		12,565		10,002		26	%		13,692		8,296		65	%
Securities borrowing — conduit business		472		1,165		(59	%)		526		1,400		(62	%)

Interest-earning assets	$	13,037	$	11,167		17	%	$	14,218	$	9,696		47	%


Client credit balances	$	7,692	$	6,129		26	%	$	8,898	$	4,837		84	%
Securities lending (excluding conduit business)		1,752		1,322		33	%		1,694		1,185		43	%

Interest-bearing liabilities (excluding conduit business)		9,444		7,451		27	%		10,592		6,022		76	%
Securities lending — conduit business		472		1,165		(59	%)		526		1,400		(62	%)

Interest-bearing liabilities	$	9,916	$	8,616		15	%	$	11,118	$	7,422		50	%


	Avg. Annualized Yield (Cost)									Avg. Annualized Yield (Cost)
	Three months ended						Net Yield			Nine months ended						Net Yield
	June 30,						Increase/			June 30,						Increase/
	2010			2009			(Decrease)			2010			2009			(Decrease)
Segregated cash		0.13	%		0.14	%		(0.01	%)		0.13	%		0.19	%		(0.06	%)
Client margin balances		4.68	%		4.99	%		(0.31	%)		4.71	%		5.26	%		(0.55	%)
Other cash and interest-earning investments, net		0.09	%		0.17	%		(0.08	%)		0.09	%		0.40	%		(0.31	%)
Client credit balances		(0.03	%)		(0.05	%)		0.02	%		(0.04	%)		(0.08	%)		0.04	%

Net interest revenue (excluding conduit business)		3.50	%		3.88	%		(0.38	%)		2.99	%		3.93	%		(0.94	%)

Securities borrowing — conduit business		0.35	%		0.52	%		(0.17	%)		0.34	%		0.96	%		(0.62	%)
Securities lending — conduit business		(0.20	%)		(0.36	%)		0.16	%		(0.20	%)		(0.59	%)		0.39	%

Net interest revenue		3.38	%		3.49	%		(0.11	%)		2.88	%		3.41	%		(0.53	%)

The following tables set forth key metrics that we use in analyzing investment product fee revenues (dollars in millions):


	Fee Revenue							Fee Revenue
	Three months ended							Nine months ended
	June 30,				Increase/			June 30,				Increase/
	2010		2009		(Decrease)			2010		2009		(Decrease)
Money market mutual fund	$	2.3	$	19.0	$	(16.7	)	$	6.3	$	102.0	$	(95.7	)
Other investment product fees		30.9		20.1		10.8			86.7		54.3		32.4

Total investment product fees	$	33.2	$	39.1	$	(5.9	)	$	93.0	$	156.3	$	(63.3	)


	Average Balance							Average Balance
	Three months ended							Nine months ended
	June 30,				%			June 30,				%
	2010		2009		Change			2010		2009		Change
Money market mutual fund	$	9,076	$	22,736		(60	%)	$	10,181	$	25,936		(61	%)
Other fee-based investment balances		53,298		36,240		47	%		49,929		34,303		46	%

Total fee-based investment balances	$	62,374	$	58,976		6	%	$	60,110	$	60,239		(0	%)


	Average Annualized Yield									Average Annualized Yield
	Three months ended									Nine months ended
	June 30,						Increase/			June 30,						Increase/
	2010			2009			(Decrease)			2010			2009			(Decrease)
Money market mutual fund		0.10	%		0.33	%		(0.23	%)		0.08	%		0.52	%		(0.44	%)
Other investment product fees		0.23	%		0.22	%		0.01	%		0.23	%		0.21	%		0.02	%
Total investment product fees		0.21	%		0.26	%		(0.05	%)		0.20	%		0.34	%		(0.14	%)

Transaction-Based Revenue Metrics

The following table sets forth several key metrics regarding client trading activity, which we utilize in measuring and evaluating performance and the results of our operations:


	Three months ended									Nine months ended
	June 30,						%			June 30,						%
	2010			2009			Change			2010			2009			Change
Total trades (in millions)		26.05			24.66			6	%		73.00			66.99			9	%
Average commissions and transaction fees per trade ⁽¹⁾	$	12.79		$	13.66			(6	%)	$	12.93		$	13.28			(3	%)
Average client trades per day		413,461			391,506			6	%		390,369			358,232			9	%
Average client trades per account (annualized)		13.2			13.5			(2	%)		12.7			12.6			1	%
Activity rate — total accounts		5.3	%		5.4	%		(2	%)		5.0	%		5.0	%		0	%
Activity rate — funded accounts		7.6	%		7.6	%		0	%		7.3	%		7.1	%		3	%
Trading days		63.0			63.0			0	%		187.0			187.0			0	%


(1)		Average commissions and transaction fees per trade excludes thinkorswim active trader business.

Client Account and Client Asset Metrics

The following table sets forth certain metrics regarding client accounts and client assets, which we use to analyze growth and trends in our client base:


	Three months ended									Nine months ended
	June 30,						%			June 30,						%
	2010			2009			Change			2010			2009			Change
Total accounts (beginning of period)		7,788,000			7,195,000			8	%		7,563,000			6,895,000			10	%
New accounts opened		175,000			176,000			(1	%)		542,000			586,000			(8	%)
Accounts purchased		—			197,000			(100	%)		—			197,000			(100	%)
Accounts closed		(73,000	)		(77,000	)		(5	%)		(215,000	)		(187,000	)		15	%

Total accounts (end of period)		7,890,000			7,491,000			5	%		7,890,000			7,491,000			5	%

Percentage change during period		1	%		4	%					4	%		9	%

Funded accounts (beginning of period)		5,379,000			5,105,000			5	%		5,279,000			4,918,000			7	%
Funded accounts (end of period)		5,440,000			5,291,000			3	%		5,440,000			5,291,000			3	%
Percentage change during period		1	%		4	%					3	%		8	%

Client assets (beginning of period, in billions)	$	341.5		$	224.9			52	%	$	302.0		$	278.0			9	%
Client assets (end of period, in billions)	$	323.8		$	265.0			22	%	$	323.8		$	265.0			22	%
Percentage change during period		(5	%)		18	%					7	%		(5	%)

Net new assets (in billions)	$	8.9		$	6.9			29	%	$	27.9		$	21.2			32	%
Net new assets annualized growth rate ⁽¹⁾		10	%		12	%		(17	%)		12	%		10	%		20	%


(1)		Annualized net new assets as a percentage of client assets as of the beginning of the period.

In connection with our purchase of thinkorswim on June 11, 2009, we acquired approximately 197,000 total accounts, approximately 113,000 funded accounts and approximately $4 billion in client assets.

Consolidated Statements of Income Data

The following table summarizes certain data from our Condensed Consolidated Statements of Income for analysis purposes (dollars in millions):


	Three months ended									Nine months ended
	June 30,						%			June 30,						%
	2010			2009			Change			2010			2009			Change
Revenues:
Transaction-based revenues:
Commissions and transaction fees	$	333.1		$	338.5			(2	%)	$	943.7		$	891.0			6	%

Asset-based revenues:
Interest revenue		112.8			101.2			11	%		315.5			264.0			20	%
Brokerage interest expense		(1.4	)		(2.6	)		(45	%)		(4.7	)		(13.1	)		(64	%)

Net interest revenue		111.4			98.6			13	%		310.8			250.9			24	%

Insured deposit account fees		180.1			125.1			44	%		505.4			424.9			19	%
Investment product fees		33.2			39.1			(15	%)		93.0			156.3			(41	%)

Total asset-based revenues		324.7			262.8			24	%		909.1			832.1			9	%
Other revenues		34.1			12.5			173	%		99.0			26.9			268	%

Net revenues		691.8			613.8			13	%		1,951.9			1,750.0			12	%


Operating expenses:
Employee compensation and benefits		156.3			128.2			22	%		467.8			366.4			28	%
Clearing and execution costs		22.4			16.1			39	%		68.4			46.8			46	%
Communications		27.0			20.8			30	%		76.3			57.4			33	%
Occupancy and equipment costs		35.5			30.0			18	%		104.2			89.6			16	%
Depreciation and amortization		14.5			11.2			30	%		41.6			33.3			25	%
Amortization of acquired intangible assets		25.1			17.6			43	%		75.7			48.3			57	%
Professional services		32.0			43.9			(27	%)		97.2			93.4			4	%
Advertising		51.6			41.4			25	%		188.4			141.2			33	%
Gains on money market funds and client guarantees		(9.2	)		—			N/A			(11.1	)		—			N/A
Other		36.4			14.5			151	%		75.3			34.8			117	%


Total operating expenses		391.5			323.7			21	%		1,183.7			911.2			30	%


Operating income		300.3			290.1			3	%		768.1			838.8			(8	%)

Other expense:
Interest on borrowings		11.2			8.4			34	%		33.8			32.2			5	%
Loss on debt refinancing		—			—			N/A			8.4			—			N/A
Loss on sale of investments		—			2.0			(100	%)		—			2.0			(100	%)

Total other expense		11.2			10.4			8	%		42.2			34.2			23	%


Pre-tax income		289.1			279.7			3	%		726.0			804.6			(10	%)
Provision for income taxes		109.6			109.2			0	%		247.7			317.6			(22	%)


Net income	$	179.4		$	170.5			5	%	$	478.2		$	487.0			(2	%)


Other information:
Effective income tax rate		37.9	%		39.0	%					34.1	%		39.5	%
Average debt outstanding	$	1,277.9		$	1,440.5			(11	%)	$	1,312.5		$	1,445.2			(9	%)
Average interest rate incurred on borrowings		3.19	%		1.93	%					3.08	%		2.65	%


Note:		Details may not sum to totals and subtotals due to rounding differences. Change percentages are based on non-rounded amounts from the Condensed Consolidated Statements of Income.

Three-Month Periods Ended June 30, 2010 and 2009

Net Revenues

Commissions and transaction fees decreased 2% to $333.1 million, primarily due to lower average commissions and transaction fees per trade, substantially offset by higher client trades per day. Average commissions and transaction fees per trade decreased to $12.79 per trade for the third quarter of fiscal 2010 from $13.66 for the third quarter of fiscal 2009, primarily due to lower payment for order flow revenue per trade and the full quarter effect of thinkorswim trading activity, which earns somewhat lower average commissions and transaction fees per trade, during the third quarter of fiscal 2010. We acquired thinkorswim on June 11, 2009; therefore, the third quarter of fiscal 2009 included only 14 trading days of thinkorswim activity. These decreases were partially offset by a higher percentage of option trades and a decrease in promotional trades during the third quarter of fiscal 2010. Average client trades per day increased 6% to 413,461 for the third quarter of fiscal 2010 compared to 391,506 for the third quarter of fiscal 2009 due to the additional trading activity resulting from the thinkorswim acquisition. However, on a pro forma basis combined with thinkorswim, average client trades per day decreased 8% from 450,824 for the third quarter of fiscal 2009. Average client trades per account (annualized) were 13.2 for the third quarter of fiscal 2010 compared to 13.5 for the third quarter of fiscal 2009.

Asset-based revenues, which consist of net interest revenue, insured deposit account fees and investment product fees, increased 24% to $324.7 million during the third quarter of fiscal 2010 compared to the third quarter of fiscal 2009, as described below.

Net interest revenue increased 13% to $111.4 million, due primarily to a 74% increase in average client margin balances, partially offset by a $21.2 million decrease in net interest revenue from our securities borrowing/lending program and a decrease of 31 basis points in the average yield earned on client margin balances for the third quarter of fiscal 2010 compared to the third quarter of fiscal 2009.

Insured deposit account fees increased 44% to $180.1 million, due primarily to an 86% increase in average client insured deposit account balances during the third quarter of fiscal 2010 compared to the third quarter of fiscal 2009 and the effect of a $13.3 million (23 basis points) FDIC special regulatory assessment during the third quarter of fiscal 2009. The increased insured deposit account balances are primarily due to our strategy of migrating client cash held in client credit balances or swept to money market mutual funds to the insured deposit account offering beginning in April 2009. We expect our migration strategy to position the Company to earn higher net revenues, as we generally earn a higher yield on insured deposit account balances than on money market mutual fund or client credit balances. The effect of the increased insured deposit account balances was partially offset by a decrease of 73 basis points (excluding the effect of the FDIC special regulatory assessment mentioned above) in the average yield earned on the insured deposit account assets during the third quarter of fiscal 2010.

Investment product fees decreased 15% to $33.2 million, primarily due to a 60% decrease in average money market mutual fund balances and a decrease of 23 basis points in the average yield earned on client money market mutual fund balances, partially offset by a 47% increase in average other fee-based investment balances in the third quarter of fiscal 2010 compared to the third quarter of fiscal 2009. The decrease in average money market mutual fund balances resulted primarily from our client cash migration strategy discussed above. The decrease in the average yield earned in the third quarter of fiscal 2010 was primarily due to our decision to voluntarily begin waiving fees on certain money market mutual funds during the first quarter of fiscal 2009 in order to prevent our clients’ yields on such funds from becoming negative. The unfavorable impact of the fee waivers on the average yield earned gradually increased during fiscal 2009.

Other revenues increased to $34.1 million, primarily due to an increase in education revenues as a result of the thinkorswim acquisition.

Operating Expenses

Employee compensation and benefits expense increased 22% to $156.3 million, primarily due to an increase in average headcount resulting from the thinkorswim acquisition and higher incentive-based compensation related to actual Company and individual performance, including our success in attracting net new client assets, in the third quarter of fiscal 2010 compared to the third quarter of fiscal 2009. The average number of full-time equivalent employees increased to 5,327 for the third quarter of fiscal 2010 compared to 4,709 for the third quarter of fiscal 2009.

Clearing and execution costs increased 39% to $22.4 million, due primarily to expenses associated with the additional accounts and transaction processing volumes resulting from the thinkorswim acquisition, partially offset by lower client statement processing costs in the third quarter of fiscal 2010 compared to the third quarter of fiscal 2009.

Communications expense increased 30% to $27.0 million, due primarily to expenses associated with the additional accounts and transaction processing volumes resulting from the thinkorswim acquisition, increased telecommunications costs resulting from our migration to a new secondary data center during fiscal 2009 and increased costs for quotes and market information.

Occupancy and equipment costs increased 18% to $35.5 million due to upgrades to our technology infrastructure and facilities and due to the addition of thinkorswim occupancy and equipment costs.

Depreciation and amortization increased 30% to $14.5 million, due primarily to depreciation on recent technology infrastructure upgrades and leasehold improvements and due to depreciation of assets recorded in the thinkorswim acquisition.

Amortization of acquired intangible assets increased 43% to $25.1 million, due to amortization of intangible assets recorded in the thinkorswim acquisition.

Professional services decreased 27% to $32.0 million, primarily due to a $13 million acquisition earn-out payment and a $5 million write-off of software development costs in the third quarter of fiscal 2009, partially offset by higher usage of consulting and contract services during the third quarter of fiscal 2010 in connection with new product development, technology infrastructure upgrades and the integration of thinkorswim.

Advertising expense increased 25% to $51.6 million, primarily due to marketing support for the thinkorswim business. We generally adjust our level of advertising spending in relation to stock market activity and other market conditions in an effort to maximize the number of new accounts while minimizing the advertising cost per new account.

Gains on money market funds and client guarantees consists of a $9.2 million favorable fair market value adjustment to our Reserve Primary Fund holdings, based on updated portfolio holdings data published by The Reserve during the third quarter of fiscal 2010. During July 2010, we received distributions of $8.9 million from the Primary Fund.

Other operating expenses increased 151% to $36.4 million, primarily due to increased litigation, arbitration and regulatory expenses, as well as additional expenses related to the thinkorswim business, including education travel and venue costs, in the third quarter of fiscal 2010 compared to the third quarter of fiscal 2009.

Other Expenses and Income Taxes

Interest on borrowings increased 34% to $11.2 million, due primarily to higher average interest rates incurred on our debt, partially offset by a decrease of approximately $163 million in average debt outstanding during the third quarter of fiscal 2010 compared to the third quarter of fiscal 2009. The average interest rate incurred on our debt was 3.19% for the third quarter of fiscal 2010, compared to 1.93% for the third quarter of fiscal 2009, primarily due to the refinancing of our long-term debt on November 25, 2009.

Our effective income tax rate was 37.9% for the third quarter of fiscal 2010, compared to 39.0% for the third quarter of fiscal 2009. The decrease was primarily due to unfavorable income tax adjustments of approximately $1.7 million during the third quarter of fiscal 2009 resulting from state income tax law changes. We expect to experience some volatility in our quarterly and annual effective income tax rate because current accounting rules for uncertain tax positions require that any change in measurement of a tax position taken in a prior tax year be recognized as a discrete event in the period in which it occurs.

Nine-Month Periods Ended June 30, 2010 and 2009

Net Revenues

Commissions and transaction fees increased 6% to $943.7 million, primarily due to additional trading activity resulting from the thinkorswim acquisition in the third quarter of fiscal 2009, partially offset by lower average commissions and transaction fees per trade. Average client trades per day increased 9% to 390,369 for the first nine months of fiscal 2010 compared to 358,232 for the first nine months of fiscal 2009. However, on a pro forma basis combined with thinkorswim, average client trades per day decreased 7% from 421,407 for the first nine months of fiscal 2009. Average client trades per account (annualized) were 12.7 for the first nine months of fiscal 2010 compared to 12.6 for the first nine months of fiscal 2009. Average commissions and transaction fees per trade decreased to $12.93 per trade for the first nine months of fiscal

2010 from $13.28 for the first nine months of fiscal 2009, primarily due to lower payment for order flow revenue per trade and the effect of thinkorswim during the first nine months of fiscal 2010, which earns somewhat lower average commissions and transaction fees per trade. These decreases were partially offset by a higher percentage of option trades and a decrease in promotional trades during the first nine months of fiscal 2010.

Net interest revenue increased 24% to $310.8 million, due primarily to a 60% increase in average client margin balances, partially offset by a decrease of 55 basis points in the average yield earned on client margin balances and a $12.4 million decrease in net interest revenue from our securities borrowing/lending program for the first nine months of fiscal 2010 compared to the first nine months of fiscal 2009.

Insured deposit account fees increased 19% to $505.4 million, due primarily to a 91% increase in average client insured deposit account balances during the first nine months of fiscal 2010 compared to the first nine months of fiscal 2009 and the effect of a $13.3 million (9 basis points) FDIC special regulatory assessment during the first nine months of fiscal 2009. The increased insured deposit account balances are primarily due to our strategy of migrating client cash held in client credit balances or swept to money market mutual funds to the insured deposit account offering beginning in April 2009. In January 2010, we moved an additional $4.2 billion of client cash held in client credit balances into the insured deposit account offering. The effect of the increased insured deposit account balances was significantly offset by a decrease of 115 basis points (excluding the effect of the FDIC special regulatory assessment mentioned above) in the average yield earned on the insured deposit account assets during the first nine months of fiscal 2010.

Investment product fees decreased 41% to $93.0 million, primarily due to a 61% decrease in average money market mutual fund balances and a decrease of 44 basis points in the average yield earned on client money market mutual fund balances, partially offset by a 46% increase in average other fee-based investment balances in the first nine months of fiscal 2010 compared to the first nine months of fiscal 2009. The decrease in average money market mutual fund balances resulted primarily from our client cash migration strategy discussed above. The decrease in the average yield earned in the first nine months of fiscal 2010 was primarily due to our decision to voluntarily begin waiving fees on certain money market mutual funds during the first quarter of fiscal 2009 in order to prevent our clients’ yields on such funds from becoming negative. The unfavorable impact of the fee waivers on the average yield earned gradually increased during fiscal 2009.

Other revenues increased to $99.0 million, primarily due to an increase in education revenues as a result of the thinkorswim acquisition.

Operating Expenses

Employee compensation and benefits expense increased 28% to $467.8 million, primarily due to an increase in average headcount resulting from the thinkorswim acquisition and higher incentive-based compensation related to actual Company and individual performance, including our success in attracting net new client assets, in the first nine months of fiscal 2010 compared to the first nine months of fiscal 2009. The average number of full-time equivalent employees increased to 5,292 for the first nine months of fiscal 2010 compared to 4,657 for the first nine months of fiscal 2009.

Clearing and execution costs increased 46% to $68.4 million, due primarily to expenses associated with the additional accounts and transaction processing volumes resulting from the thinkorswim acquisition, partially offset by lower client statement processing costs in the first nine months of fiscal 2010 compared to the first nine months of fiscal 2009.

Communications expense increased 33% to $76.3 million, due primarily to expenses associated with the additional accounts and transaction processing volumes resulting from the thinkorswim acquisition, increased telecommunications costs resulting from our migration to a new secondary data center during fiscal 2009 and increased costs for quotes and market information.

Occupancy and equipment costs increased 16% to $104.2 million due to upgrades to our technology infrastructure and facilities and due to the addition of thinkorswim occupancy and equipment costs.

Depreciation and amortization increased 25% to $41.6 million, due primarily to depreciation on recent technology infrastructure upgrades and leasehold improvements and due to depreciation of assets recorded in the thinkorswim acquisition.

Amortization of acquired intangible assets increased 57% to $75.7 million, due to amortization of intangible assets recorded in the thinkorswim acquisition.

Professional services increased 4% to $97.2 million, primarily due to higher usage of consulting and contract services during the first nine months of fiscal 2010 in connection with new product development, technology infrastructure upgrades and the

integration of thinkorswim. These increases were significantly offset by the effect of a $13 million acquisition earn-out payment and a $5 million write-off of software development costs during the first nine months of fiscal 2009.

Advertising expense increased 33% to $188.4 million, primarily due to marketing support for the thinkorswim business.

Gains on money market funds and client guarantees consists of $9.7 million of favorable fair market value adjustments to our Reserve Primary Fund holdings, based on updated portfolio holdings data published by The Reserve and $1.4 million of gains related to the final fulfillment of our auction rate securities and Primary Fund client guarantees. Our client guarantees are discussed further under Item 1 – Financial Statements – Notes to Condensed Consolidated Financial Statements: “Auction Rate Securities Matters” and “Guarantees” under Note 7 – Commitments and Contingencies.

Other operating expenses increased 117% to $75.3 million, primarily due to increased litigation, arbitration and regulatory expenses, as well as additional expenses related to the thinkorswim business, including education travel and venue costs, in the first nine months of fiscal 2010 compared to the first nine months of fiscal 2009.

Other Expenses and Income Taxes

Interest on borrowings increased 5% to $33.8 million, due primarily to higher average interest rates incurred on our debt, partially offset by a decrease of approximately $133 million in average debt outstanding during the first nine months of fiscal 2010 compared to the first nine months of fiscal 2009. The average interest rate incurred on our debt was 3.08% for the first nine months of fiscal 2010, compared to 2.65% for the first nine months of fiscal 2009, primarily due to the refinancing of our long-term debt on November 25, 2009.

Loss on debt refinancing of $8.4 million consists of a charge to write off the unamortized balance of debt issuance costs associated with the Term A and Term B credit facilities under our January 23, 2006 credit agreement. On November 25, 2009, we refinanced our long-term debt by issuing the Senior Notes and used the proceeds from the issuance of the Senior Notes, together with cash on hand, to repay in full the outstanding principal under our January 23, 2006 credit agreement.

Our effective income tax rate was 34.1% for the first nine months of fiscal 2010, compared to 39.5% for the first nine months of fiscal 2009. The effective tax rate for the first nine months of fiscal 2010 was unusually low due to $28.8 million of favorable resolutions of certain federal and state income tax matters during the first nine months of fiscal 2010. These items favorably impacted our earnings for the first nine months of fiscal 2010 by approximately $0.05 per share. The effective tax rate for the first nine months of fiscal 2009 was slightly higher than normal due to unfavorable deferred income tax adjustments of approximately $8.9 million resulting from state income tax law changes and capital loss limitations on certain money market mutual fund holdings. These items unfavorably impacted our earnings for the first nine months of fiscal 2009 by approximately $0.02 per share.

LIQUIDITY AND CAPITAL RESOURCES

We have historically financed our liquidity and capital needs primarily through the use of funds generated from operations and from borrowings under our credit agreements. We have also issued common stock and long-term debt to finance mergers and acquisitions and for other corporate purposes. Our liquidity needs during the first nine months of fiscal 2010 were financed primarily from our earnings and cash on hand. We plan to finance our operational capital and liquidity needs during the remainder of fiscal 2010 primarily from our earnings, cash on hand and, if necessary, borrowings on our parent company and broker-dealer credit facilities.

On July 20, 2009, our broker-dealer subsidiary, TD AMERITRADE, Inc. (“TDA Inc.”), entered into settlement agreements with the SEC and other regulatory authorities, in which we agreed to extend an offer to purchase eligible auction rate securities (“ARS”) from certain current and former account holders. The offer commenced on August 10, 2009. The final phase of the offer expired on March 23, 2010 and TDA Inc. completed the repurchases on March 30, 2010. Through March 30, 2010, TDA Inc. purchased eligible ARS with an aggregate par value of approximately $305 million. ARS are long-term variable rate securities tied to short-term interest rates that are reset through a “Dutch auction” process. In February 2008, the Dutch auction process failed and holders were no longer able to liquidate their holdings through the auction process. Funds from ARS are not expected to be accessible until one of the following occurs: a successful auction, the issuer redeems the issue, a buyer is found outside of the auction process or the underlying securities mature. Substantial delays in the sale or redemption of our ARS holdings could adversely affect our liquidity and require us to borrow on our lines of credit or seek alternative financing. As of June 30, 2010, TDA Inc. held ARS with a fair value of approximately $243 million.

Dividends from our subsidiaries are a source of liquidity for the parent company. Some of our subsidiaries are subject to requirements of the SEC, the Financial Industry Regulatory Authority (“FINRA”), the Commodity Futures Trading

Commission (“CFTC”), the National Futures Association (“NFA”) and other regulators relating to liquidity, capital standards and the use of client funds and securities, which may limit funds available for the payment of dividends to the parent company.

Under the SEC’s Uniform Net Capital Rule (Rule 15c3-1 under the Securities Exchange Act of 1934), our broker-dealer subsidiaries are required to maintain, at all times, at least the minimum level of net capital required under Rule 15c3-1. For clearing broker-dealers, this minimum net capital level is determined by a calculation described in Rule 15c3-1 that is primarily based on each broker-dealer’s “aggregate debits,” which primarily are a function of client margin balances at our clearing broker-dealer subsidiary. Since our aggregate debits may fluctuate significantly, our minimum net capital requirements may also fluctuate significantly from period to period. The parent company may make cash capital contributions to broker-dealer subsidiaries, if necessary, to meet minimum net capital requirements.

Liquid Assets

We consider liquid assets an important measure of our liquidity and of our ability to fund corporate investing and financing activities. Liquid assets is a non-GAAP financial measure. We define liquid assets as the sum of (a) corporate cash and cash equivalents, (b) corporate short-term investments, (c) regulatory net capital of (i) our clearing broker-dealer subsidiary in excess of 5% of aggregate debit items and (ii) our introducing broker-dealer subsidiaries in excess of 120% of the minimum dollar net capital requirement or in excess of 8 1/3% of aggregate indebtedness and (d) Tier 1 capital of our trust company in excess of the minimum dollar requirement. We include the excess capital of our broker-dealer and trust company subsidiaries in liquid assets, rather than simply including broker-dealer and trust cash and cash equivalents, because capital requirements may limit the amount of cash available for dividend from the broker-dealer and trust subsidiaries to the parent company. Excess capital, as defined under clauses (c) and (d) above, is generally available for dividend from the broker-dealer and trust company subsidiaries to the parent company. Liquid assets should be considered as a supplemental measure of liquidity, rather than as a substitute for cash and cash equivalents. The following table sets forth a reconciliation of cash and cash equivalents, which is the most directly comparable GAAP measure, to liquid assets (dollars in thousands):


	June 30,			September 30,
	2010			2009			Change
Cash and cash equivalents	$	716,463		$	791,211		$	(74,748	)
Less: Broker-dealer cash and cash equivalents		(510,593	)		(473,996	)		(36,597	)
Trust company cash and cash equivalents		(51,488	)		(25,143	)		(26,345	)
Investment advisory cash and cash equivalents		(26,946	)		(18,935	)		(8,011	)

Corporate cash and cash equivalents		127,436			273,137			(145,701	)

Plus: Corporate short-term investments		739			49,496			(48,757	)
Excess trust company Tier 1 capital		12,637			4,658			7,979
Excess broker-dealer regulatory net capital		1,016,544			814,836			201,708

Liquid assets	$	1,157,356		$	1,142,127		$	15,229

The increase in liquid assets is summarized as follows (dollars in thousands):


Liquid assets as of September 30, 2009	$	1,142,127

Plus: Pre-tax income		725,972
Proceeds from exercise of stock options		11,842
Proceeds from the issuance of long-term debt		1,248,557
Other changes in working capital and regulatory net capital		85,344

Less: Income taxes paid		(233,009	)
Purchase of property and equipment		(61,180	)
Purchase of treasury stock		(248,188	)
Principal payments on long-term debt and capital lease obligations		(1,422,491	)
Payment of debt issuance costs		(10,595	)
Additional net capital requirement due to increase in aggregate debits		(81,023	)


Liquid assets as of June 30, 2010	$	1,157,356

Loan Facilities

Senior Notes — On November 25, 2009 we sold, through a public offering, $1.25 billion aggregate principal amount of unsecured senior notes, consisting of $250 million aggregate principal amount of 2.950% Senior Notes due December 1, 2012 (the “2012 Notes”), $500 million aggregate principal amount of 4.150% Senior Notes due December 1, 2014 (the “2014 Notes”) and $500 million aggregate principal amount of 5.600% Senior Notes due December 1, 2019 (the “2019 Notes” and, collectively with the 2012 Notes and the 2014 Notes, the “Senior Notes”). The Senior Notes were issued at an aggregate discount of $1.4 million, which is being amortized to interest expense over the terms of the respective Senior Notes. Interest on the Senior Notes is payable semi-annually in arrears on June 1 and December 1 of each year.

On November 25, 2009, we used the net proceeds from the issuance of the Senior Notes, together with approximately $158 million of cash on hand, to repay in full the outstanding principal under our January 23, 2006 credit agreement. Upon repayment, the January 23, 2006 credit agreement (including the Term A Facility, the Term B Facility and the Revolving Facility as amended on November 5, 2009) was automatically amended and restated in its entirety pursuant to the Amended and Restated Credit Agreement (the “Restated Credit Agreement”), dated as of November 25, 2009, as described below.

The Senior Notes are jointly and severally and fully and unconditionally guaranteed by each of our current and future subsidiaries that is or becomes a borrower or a guarantor under the Restated Credit Agreement. Currently, the only subsidiary guarantor of the obligations under the Senior Notes is TD AMERITRADE Online Holdings Corp. (“TDAOH”). The Senior Notes and the guarantee by TDAOH are the general senior unsecured obligations of the Company and TDAOH.

We may redeem each series of the Senior Notes, in whole at any time or in part from time to time, at a redemption price equal to the greater of (a) 100% of the principal amount of the notes being redeemed, and (b) the sum of the present values of the remaining scheduled payments of principal and interest on the notes being redeemed, discounted to the date of redemption on a semi-annual basis at the comparable U.S. Treasury rate, plus: 25 basis points in the case of the 2012 Notes, 30 basis points in the case of the 2014 Notes and 35 basis points in the case of the 2019 Notes, plus, in each case, accrued and unpaid interest to the date of redemption.

Interest Rate Swaps — We are exposed to changes in the fair value of our fixed-rate Senior Notes resulting from interest rate fluctuations. To hedge this exposure, on December 30, 2009, we entered into fixed-for-variable interest rate swaps on the 2012 Notes and 2014 Notes for notional amounts of $250 million and $500 million, respectively, with maturity dates matching the respective maturity dates of the 2012 Notes and 2014 Notes. The interest rate swaps effectively change the fixed-rate interest on the 2012 Notes and 2014 Notes to variable-rate interest. Under the terms of the interest rate swap agreements, we receive semi-annual fixed-rate interest payments based on the same rates applicable to the 2012 Notes and 2014 Notes, and make quarterly variable-rate interest payments based on three-month LIBOR plus (a) 0.9693% for the swap on the 2012 Notes and (b) 1.245% for the swap on the 2014 Notes.

The interest rate swaps are accounted for as fair value hedges and qualify for the shortcut method of accounting. Changes in the payment of interest resulting from the interest rate swaps are recorded as an offset to interest on borrowings on the Condensed Consolidated Statements of Income. Changes in fair value of the interest rate swaps are completely offset by changes in fair value of the related notes, resulting in no effect on net income. For the nine months ended June 30, 2010, we recorded a $28.0 million gain for the change in fair value of the interest rate swaps and an offsetting $28.0 million fair value loss on the hedged fixed-rate debt. The offsetting fair value gains and losses were recorded in interest on borrowings on the Condensed Consolidated Statements of Income.

Restated Revolving Facility — The Restated Credit Agreement consists of a senior unsecured revolving credit facility in the aggregate principal amount of $300 million (the “Restated Revolving Facility”). The maturity date of the Restated Revolving Facility is December 31, 2012. The applicable interest rate under the Restated Revolving Facility is calculated as a per annum rate equal to, at our option, (a) LIBOR plus an interest rate margin (“LIBOR loans”) or (b) (i) the highest of (x) the prime rate, (y) the federal funds effective rate plus 0.50% or (z) one-month LIBOR plus 1.00%, plus (ii) an interest rate margin (“Base Rate loans”). The interest rate margin ranges from 2.00% to 4.00% for LIBOR loans and from 1.00% to 3.00% for Base Rate loans, determined by reference to our public debt ratings. We are obligated to pay a commitment fee ranging from 0.225% to 0.750% on any unused amount of the Restated Revolving Facility, determined by reference to our public debt ratings. As of June 30, 2010, the interest rate margin would be 2.50% for LIBOR loans and 1.50% for Base Rate loans, and the commitment fee is 0.375% per annum, each determined by reference to our current Standard & Poor’s public debt rating of BBB+. There were no borrowings outstanding under the Restated Revolving Facility as of June 30, 2010.

The Restated Credit Agreement contains negative covenants that limit or restrict the incurrence of liens, indebtedness of subsidiaries, mergers, consolidations, transactions with affiliates, change in nature of business and the sale of all or substantially all of our assets and the assets of our subsidiaries, subject to certain exceptions. We are also required to maintain compliance with a maximum consolidated leverage ratio covenant and a minimum consolidated interest coverage ratio covenant, and our broker-dealer subsidiaries are required to maintain compliance with a minimum regulatory net capital covenant. We are restricted under the Restated Credit Agreement from incurring additional indebtedness in an aggregate principal amount in excess of $100 million that includes any covenants that are more restrictive (taken as a whole) as to the Company than those contained in the Restated Credit Agreement, unless the Restated Credit Agreement is amended to include such more restrictive covenants prior to the incurrence of such additional indebtedness. We were in compliance with all covenants under the Restated Credit Agreement as of June 30, 2010.

Broker-Dealer Credit Facilities — Our wholly-owned broker-dealer subsidiaries had access to secured uncommitted credit facilities with financial institutions of up to $630 million as of June 30, 2010 and September 30, 2009. The broker-dealer subsidiaries also had access to unsecured uncommitted credit facilities of up to $150 million as of June 30, 2010 and September 30, 2009. The financial institutions may make loans under line of credit arrangements or, in some cases, issue letters of credit under these facilities. The secured credit facilities require us to pledge qualified client securities to secure outstanding obligations under these facilities. Borrowings under the secured and unsecured credit facilities bear interest at a variable rate based on the federal funds rate. There were no borrowings outstanding or letters of credit issued under the secured or unsecured credit facilities as of June 30, 2010 and September 30, 2009. As of June 30, 2010 and September 30, 2009, approximately $780 million was available to our broker-dealer subsidiaries pursuant to uncommitted credit facilities for either loans or, in some cases, letters of credit.

Stock Repurchase Programs

On August 11, 2009, our board of directors authorized the repurchase of up to 15 million shares of our common stock. We initiated a stock repurchase program under this authorization during the third quarter of fiscal 2010 and repurchased 14 million shares at a weighted average price of $17.40 per share. During July 2010, we completed the program by repurchasing the

remaining one million shares at a weighted average price of $15.15 per share. We repurchased a total of 15 million shares under the program at a weighted average purchase price of $17.25 per share.

On August 5, 2010, our board of directors authorized the repurchase of up to an additional 30 million shares of our common stock. No shares have been repurchased under this authorization as of the date of this report.

Contractual Obligations

The following items constitute material changes in our contractual obligations outside the ordinary course of business since September 30, 2009:

On November 25, 2009, we issued Senior Notes and repaid the outstanding principal under our January 23, 2006 credit agreement, as described above under “Loan Facilities.”

Our income taxes payable decreased from $358.6 million as of September 30, 2009 to $191.4 million as of June 30, 2010. Income taxes payable as of June 30, 2010 primarily consists of liabilities for uncertain tax positions and related interest and penalties. The timing of payments, if any, on liabilities for uncertain tax positions cannot be predicted with reasonable accuracy.

Off-Balance Sheet Arrangements

We enter into guarantees and other off-balance sheet arrangements in the ordinary course of business, primarily to meet the needs of our clients and manage our asset-based revenues. For information on these arrangements, see the following sections under Item 1, Financial Statements – Notes to Condensed Consolidated Financial Statements: “Auction Rate Securities Matters” and “Guarantees” under Note 7 – COMMITMENTS AND CONTINGENCIES and “Insured Deposit Account Agreement” under Note 11 – RELATED PARTY TRANSACTIONS. The IDA agreement accounts for a significant percentage of our revenues (26% of our net revenues for the nine months ended June 30, 2010) and enables our clients to invest in an FDIC-insured deposit product without the need for the Company to maintain a bank charter.

NEW ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

ASC 805 — On October 1, 2009, the Company adopted ASC 805, Business Combinations . ASC 805 generally requires an acquirer to recognize the identifiable assets acquired, liabilities assumed, contingent purchase consideration and any noncontrolling interest in the acquiree at fair value on the date of acquisition. It also requires an acquirer to recognize as expense most transaction and restructuring costs as incurred, rather than include such items in the cost of the acquired entity. For the Company, ASC 805 applies prospectively to business combinations for which the acquisition date is on or after October 1, 2009. The adoption of ASC 805 did not have a material impact on the Company’s condensed consolidated financial statements.

Item 3. — Quantitative and Qualitative Disclosures about Market Risk

Market risk generally represents the risk of loss that may result from the potential change in the value of a financial instrument as a result of fluctuations in interest rates and market prices. We have established policies, procedures and internal processes governing our management of market risks in the normal course of our business operations.

Credit Risk

Two primary sources of credit risk inherent in our business are client margin lending and securities lending and borrowing. We manage risk on client margin lending by requiring clients to maintain margin collateral in compliance with regulatory and internal guidelines. We monitor required margin levels daily and, pursuant to such guidelines, require our clients to deposit additional collateral, or to reduce positions, when necessary. We continuously monitor client accounts to detect excessive concentration, large orders or positions, patterns of day trading and other activities that indicate increased risk to us.

We manage risks associated with our securities lending and borrowing activities by requiring credit approvals for counterparties, by monitoring the market value of securities loaned and collateral values for securities borrowed on a daily basis and requiring additional cash as collateral for securities loaned or return of collateral for securities borrowed when necessary and by participating in a risk-sharing program offered through the Options Clearing Corporation.

The interest rate swaps on our Senior Notes are subject to counterparty credit risk. Credit risk on derivative financial instruments is managed by limiting activity to approved counterparties that meet a minimum credit rating threshold and by entering into credit support agreements. The bilateral credit support agreement related to the interest rate swaps requires daily collateral coverage, in the form of cash or U.S. Treasury securities, for the aggregate fair value of the interest rate swaps.

Interest Rate Risk

As a fundamental part of our brokerage business, we invest in interest-earning assets and are obligated on interest-bearing liabilities. In addition, we earn fees on our insured deposit account arrangement with TD Bank USA, N.A. and TD Bank, N.A and on money market mutual funds, which are subject to interest rate risk. Changes in interest rates could affect the interest earned on assets differently than interest paid on liabilities. A rising interest rate environment generally results in our earning a larger net interest spread. Conversely, a falling interest rate environment generally results in our earning a smaller net interest spread.

Our most prevalent form of interest rate risk is referred to as “gap” risk. This risk occurs when the interest rates we earn on our assets change at a different frequency or amount than the interest rates we pay on our liabilities. We have an Asset/Liability Committee as the governance body with the responsibility of managing interest rate risk, including gap risk.

We use net interest simulation modeling techniques to evaluate the effect that changes in interest rates might have on pre-tax income. Our model includes all interest-sensitive assets and liabilities of the Company and interest-sensitive assets and liabilities associated with the insured deposit account agreement. The simulations involve assumptions that are inherently uncertain and, as a result, cannot precisely predict the impact that changes in interest rates will have on pre-tax income. Actual results may differ from simulated results due to differences in timing and frequency of rate changes, changes in market conditions and changes in management strategy that lead to changes in the mix of interest-sensitive assets and liabilities.

During fiscal 2009, the Federal Open Market Committee lowered the federal funds rate to between 0% and 0.25%. Due to the near-zero short-term interest rate environment, we have performed a simulation of a hypothetical increase in interest rates. This simulation assumes that the asset and liability structure of our Condensed Consolidated Balance Sheet and the insured deposit account arrangement would not be changed as a result of a simulated change in interest rates. The result of the simulation based on our financial position as of June 30, 2010 indicates that a gradual 1% (100 basis points) increase in interest rates over a 12-month period would result in approximately $99 million higher pre-tax income.

Other Market Risks

Our revenues and financial instruments are denominated in U.S. dollars. We generally do not enter into derivative transactions, except for hedging purposes.

Item 4. — Controls and Procedures

Disclosure Controls and Procedures

Management, including the Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2010. Management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of June 30, 2010.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II — OTHER INFORMATION

Item 1. — Legal Proceedings

account holders received unsolicited e-mail from spammers promoting certain stocks and have been subjected to an increased risk of identity theft. The complaint requests unspecified damages and injunctive and other equitable relief. A second lawsuit, captioned Zigler v. TD Ameritrade, Inc. , was filed on September 26, 2007, in the same jurisdiction on behalf of a purported nationwide class of account holders. The factual allegations of the complaint and the relief sought are substantially the same as those in the first lawsuit. The cases were consolidated under the caption In re TD Ameritrade Accountholders Litigation . The Company hired an independent consultant to investigate whether identity theft occurred as a result of the breach. The consultant conducted four investigations from August 2007 to June 2008 and reported that it found no evidence of identity theft. The parties entered into an agreement to settle the lawsuits on a class basis subject to court approval. The court denied final approval of the proposed settlement on October 23, 2009. The court ruled that the asserted benefits of the settlement to the class were not sufficient to warrant approval and that the proposed settlement was not fair, reasonable and adequate. The parties participated in a mediation on April 7, 2010 and discussed possible terms of a new settlement. The settlement discussions are continuing. The Company is unable to predict the outcome or the timing of the ultimate resolution of this matter, or the eventual loss that may result from this matter.

The Company is unable to predict the outcome or the timing of the ultimate resolution of these matters, or the potential loss, if any, that may result from these matters.

Item 1A. — Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed under Item 1A — “Risk Factors” in our annual report on Form 10-K for the year ended September 30, 2009, which could materially affect our business, financial condition or future results of operations. The risks described in our Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations.

There have been no material changes from the risk factors disclosed in the Company’s Form 10-K for the fiscal year ended September 30, 2009.

Item 2. — Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities


ISSUER PURCHASES OF EQUITY SECURITIES
					Total Number of		Maximum Number
					Shares Purchased as		of Shares that May
	Total Number of		Average Price		Part of Publicly		Yet Be Purchased
Period	Shares Purchased		Paid per Share		Announced Program		Under the Program
April 1, 2010 - April 30, 2010		2,437	$	18.94		—		N/A
May 1, 2010 - May 31, 2010		4,201,292	$	18.19		4,199,900		10,800,100
June 1, 2010 - June 30, 2010		9,800,045	$	17.07		9,800,000		1,000,100

Total — Three months ended June 30, 2010		14,003,774	$	17.41		13,999,900

On August 11, 2009, our board of directors authorized the repurchase of up to 15 million shares of our common stock. We disclosed this authorization on November 13, 2009 in our annual report on Form 10-K. The Company initiated a stock repurchase program under this authorization beginning May 10, 2010. This program was the only stock repurchase program in effect and there were no programs that expired during the third quarter of fiscal 2010.

During the three months ended June 30, 2010, 3,874 shares were repurchased from employees for income tax withholding in connection with restricted stock unit and restricted stock award distributions.

Item 6. – Exhibits


3.1		Amended and Restated Certificate of Incorporation of TD AMERITRADE Holding Corporation, dated January 24, 2006 (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K filed on January 27, 2006)

3.2		Amended and Restated By-Laws of TD AMERITRADE Holding Corporation, effective March 9, 2006 (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K filed on March 15, 2006)

4.1		First Supplemental Indenture, dated November 25, 2009, among TD AMERITRADE Holding Corporation, TD AMERITRADE Online Holdings Corp., as guarantor, and The Bank of New York Mellon Trust Company, National Association, as trustee (incorporated by reference to Exhibit 4.1 of the Company’s Form 8-K filed on November 25, 2009)

4.2		Form of 2.950% Senior Note due 2012 (included in Exhibit 4.1)

4.3		Form of 4.150% Senior Note due 2014 (included in Exhibit 4.1)

4.4		Form of 5.600% Senior Note due 2019 (included in Exhibit 4.1)

15.1		Awareness Letter of Independent Registered Public Accounting Firm

31.1		Certification of Fredric J. Tomczyk, Principal Executive Officer, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of William J. Gerber, Principal Financial Officer, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation

101.LAB		XBRL Taxonomy Extension Label

101.PRE		XBRL Taxonomy Extension Presentation

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: August 9, 2010


	TD AMERITRADE Holding Corporation (Registrant)
	By:	/s/ FREDRIC J. TOMCZYK
		Fredric J. Tomczyk
		President and Chief Executive Officer (Principal Executive Officer)


	By:	/s/ WILLIAM J. GERBER
		William J. Gerber
		Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)

TABLE OF CONTENTS

Part I Financial Information Item 1. Financial Statements Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities, Use Of Proceeds and Issuer Purchases Of Equity Securities Item 6. Exhibits

Exhibits

EX-15.1 EX-31.1 EX-31.2 EX-32.1

AMTD 10-Q Quarter ended June 30, 2010

Exhibits