TD AMERITRADE HOLDING CORP (Form: 10-Q, Received: 02/04/2011 16:01:19)

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 December 31, 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 (State or other jurisdiction of incorporation or organization)		82-0543156 (I.R.S. Employer 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 January 27, 2011, there were 573,769,164 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		24

Item 3. Quantitative and Qualitative Disclosures About Market Risk		34

Item 4. Controls and Procedures		35

Part II — OTHER INFORMATION

Item 1. Legal Proceedings		36

Item 1A. Risk Factors		37

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities		37

Item 6. Exhibits		38

Signatures		39
EX-10.1
EX-10.2
EX-14
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 December 31, 2010, and the related condensed consolidated statements of income and cash flows for the three-month periods ended December 31, 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, 2010, 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 19, 2010, 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, 2010, 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
February 4, 2011

TD AMERITRADE HOLDING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)


	December 31,			September 30,
	2010			2010
	(Unaudited)
ASSETS
Cash and cash equivalents	$	893,383		$	741,492
Short-term investments		3,595			3,592
Cash and investments segregated in compliance with federal regulations		527,343			994,026
Receivable from brokers, dealers and clearing organizations		944,822			1,207,723
Receivable from clients — net of allowance for doubtful accounts		8,315,435			7,391,432
Receivable from affiliates		100,426			92,946
Other receivables — net of allowance for doubtful accounts		67,146			68,928
Securities owned, at fair value		198,341			217,234
Property and equipment — net of accumulated depreciation and amortization		286,012			272,211
Goodwill		2,467,013			2,467,013
Acquired intangible assets — net of accumulated amortization		1,096,887			1,124,259
Deferred income taxes		9,407			9,915
Other assets		122,832			136,147


Total assets	$	15,032,642		$	14,726,918


LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Payable to brokers, dealers and clearing organizations	$	1,797,810		$	1,934,315
Payable to clients		7,011,564			6,810,391
Accounts payable and accrued liabilities		490,834			476,306
Payable to affiliates		3,604			3,244
Deferred revenue		57,029			63,512
Long-term debt		1,282,817			1,302,269
Capitalized lease obligations		18,854			20,799
Deferred income taxes		350,765			344,203


Total liabilities		11,013,277			10,955,039


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; December 31, 2010 — 573,634,541 outstanding; September 30, 2010 — 576,134,924 outstanding		6,314			6,314
Additional paid-in capital		1,558,992			1,390,283
Retained earnings		3,238,664			3,122,305
Treasury stock, common, at cost — December 31, 2010 — 57,747,319 shares; September 30, 2010 — 55,246,936 shares		(785,110	)		(747,271	)
Deferred compensation		322			196
Accumulated other comprehensive income		183			52


Total stockholders’ equity		4,019,365			3,771,879


Total liabilities and stockholders’ equity	$	15,032,642		$	14,726,918

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 December 31,
	2010			2009
Revenues:
Transaction-based revenues:
Commissions and transaction fees	$	292,696		$	309,388

Asset-based revenues:
Interest revenue		116,820			101,240
Brokerage interest expense		(1,292	)		(1,827	)

Net interest revenue		115,528			99,413

Insured deposit account fees		178,471			155,331
Investment product fees		40,697			29,421

Total asset-based revenues		334,696			284,165

Other revenues		28,798			31,065


Net revenues		656,190			624,618


Operating expenses:
Employee compensation and benefits		162,406			146,639
Clearing and execution costs		23,799			21,905
Communications		26,914			24,659
Occupancy and equipment costs		35,191			34,889
Depreciation and amortization		16,136			13,610
Amortization of acquired intangible assets		24,591			25,580
Professional services		40,316			33,707
Advertising		74,583			65,193
Other		18,167			18,036

Total operating expenses		422,103			384,218


Operating income		234,087			240,400

Other expense:
Interest on borrowings		10,825			11,629
Loss on debt refinancing		—			8,392

Total other expense		10,825			20,021


Pre-tax income		223,262			220,379
Provision for income taxes		78,223			84,142


Net income	$	145,039		$	136,237


Earnings per share — basic	$	0.25		$	0.23
Earnings per share — diluted	$	0.25		$	0.23

Weighted average shares outstanding — basic		575,485			587,843
Weighted average shares outstanding — diluted		581,243			595,634

Dividends declared per share	$	0.05		$	—

See notes to condensed consolidated financial statements.

TD AMERITRADE HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands, except share amounts)


	Three Months Ended December 31,
	2010			2009
Cash flows from operating activities:
Net income	$	145,039		$	136,237
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		16,136			13,610
Amortization of acquired intangible assets		24,591			25,580
Deferred income taxes		6,538			30,979
Loss on disposal of property		284			644
Loss on debt refinancing		—			8,392
Stock-based compensation		8,781			9,181
Excess tax benefits on stock-based compensation		(4,634	)		(5,320	)
Other, net		60			(346	)
Changes in operating assets and liabilities:
Cash and investments segregated in compliance with federal regulations		466,683			243,012
Receivable from brokers, dealers and clearing organizations		262,901			618,747
Receivable from clients, net		(924,003	)		(616,750	)
Receivable from/payable to affiliates, net		(7,018	)		5,726
Other receivables, net		1,033			11,682
Securities owned		18,893			(251,533	)
Other assets		(6,208	)		(6,582	)
Payable to brokers, dealers and clearing organizations		(136,505	)		(487,454	)
Payable to clients		201,173			631,217
Accounts payable and accrued liabilities		17,968			(89,480	)
Deferred revenue		(6,483	)		8,092


Net cash provided by operating activities		85,229			285,634


Cash flows from investing activities:
Purchase of property and equipment		(30,225	)		(20,797	)
Cash received in sale of business		5,228			—
Purchase of short-term investments		—			(1,100	)
Proceeds from sale and maturity of short-term investments		—			1,100
Proceeds from redemption of money market funds		—			11,594


Net cash used in investing activities		(24,997	)		(9,203	)

See notes to condensed consolidated financial statements.

TD AMERITRADE HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

(Unaudited)

(In thousands, except share amounts)


	Three Months Ended December 31,
	2010			2009
Cash flows from financing activities:
Proceeds from issuance of long-term debt	$	—		$	1,248,557
Payment of debt issuance costs		—			(10,032	)
Principal payments on long-term debt		—			(1,406,500	)
Principal payments on capital lease obligations		(1,945	)		(3,718	)
Proceeds from exercise of stock options; Three months ended December 31, 2010 — 113,012 shares; 2009 — 1,599,089 shares		718			5,835
Purchase of treasury stock; Three months ended December 31, 2010 — 121,487 shares; 2009 — 159,000 shares		(2,034	)		(3,229	)
Return of prepayment on structured stock repurchase		118,834			—
Payment of cash dividends		(28,680	)		—
Excess tax benefits on stock-based compensation		4,634			5,320


Net cash provided by (used in) financing activities		91,527			(163,767	)


Effect of exchange rate changes on cash and cash equivalents		132			16

Net increase in cash and cash equivalents		151,891			112,680
Cash and cash equivalents at beginning of period		741,492			791,211

Cash and cash equivalents at end of period	$	893,383		$	903,891

Supplemental cash flow information:
Interest paid	$	18,402		$	7,701
Income taxes paid	$	54,003		$	100,744
Tax benefit on exercises and distributions of stock-based compensation	$	4,634		$	9,414

Noncash financing activities:
Settlement of structured stock repurchase; 3,159,360 shares	$	50,366		$	—

See notes to condensed consolidated financial statements.

TD AMERITRADE HOLDING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three-Month Periods Ended December 31, 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, 2010.

2. ACQUIRED INTANGIBLE ASSETS

The Company’s acquired intangible assets consist of the following as of December 31, 2010 (dollars in thousands):


	Gross					Net
	Carrying		Accumulated			Carrying
	Amount		Amortization			Amount
Client relationships	$	1,229,431	$	(359,273	)	$	870,158
Technology and content		99,161		(22,813	)		76,348
Trade names		10,100		(8,028	)		2,072
Non-competition agreement		5,486		(2,851	)		2,635
Trademark license		145,674		—			145,674

	$	1,489,852	$	(392,965	)	$	1,096,887

Estimated future amortization expense for acquired intangible assets outstanding as of December 31, 2010 is as follows (dollars in thousands):


	Estimated
	Amortization
Fiscal Year	Expense
2011 Remaining	$	71,580
2012		92,370
2013		91,102
2014		90,641
2015		89,839
2016		85,544
Thereafter (to 2025)		430,137

Total	$	951,213

3. CASH AND CASH EQUIVALENTS

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


	December 31,		September 30,
	2010		2010
Corporate	$	340,845	$	234,993
Broker-dealer subsidiaries		459,728		426,618
Trust company subsidiary		60,632		50,937
Investment advisory subsidiaries		32,178		28,944

Total	$	893,383	$	741,492

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 three months ended December 31, 2010 was 35.0%, compared to 38.2% for the three months December 31, 2009. The provision for income taxes for the three months ended December 31, 2010 was unusually low due to $4.9 million of favorable resolutions of state income tax matters and $1.4 million of favorable deferred income tax adjustments resulting from recent state income tax law changes. These items favorably impacted the Company’s earnings for the three months ended December 31, 2010 by approximately $0.01 per share.

5. LONG-TERM DEBT

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


	Face		Unamortized			Fair Value		Net Carrying
December 31, 2010	Value		Discount			Adjustment ⁽¹⁾		Value
Senior Notes:
2.950% Senior Notes due 2012	$	250,000	$	(164	)	$	6,093	$	255,929
4.150% Senior Notes due 2014		500,000		(387	)		23,627		523,240
5.600% Senior Notes due 2019		500,000		(614	)		N/A		499,386

Total Senior Notes		1,250,000		(1,165	)		29,720		1,278,555
Other		4,262		N/A			N/A		4,262

Total long-term debt	$	1,254,262	$	(1,165	)	$	29,720	$	1,282,817


	Face		Unamortized			Fair Value		Net Carrying
September 30, 2010	Value		Discount			Adjustment ⁽¹⁾		Value
Senior Notes:
2.950% Senior Notes due 2012	$	250,000	$	(185	)	$	9,299	$	259,114
4.150% Senior Notes due 2014		500,000		(411	)		39,936		539,525
5.600% Senior Notes due 2019		500,000		(632	)		N/A		499,368

Total Senior Notes		1,250,000		(1,228	)		49,235		1,298,007
Other		4,262		N/A			N/A		4,262

Total long-term debt	$	1,254,262	$	(1,228	)	$	49,235	$	1,302,269


(1)		Fair value adjustments relate to changes in the fair value of the debt while in a fair value hedging relationship. See “Interest Rate Swaps” below.

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 2.950% Senior Notes due December 1, 2012 (the “2012 Notes”) and the 4.150% Senior Notes due December 1, 2014 (the “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. In addition, on January 7, 2011, the Company entered into a fixed-for-variable interest rate swap on the 5.600% Senior Notes due December 1, 2019 (the “2019 Notes”) for a notional amount of $500 million, with a maturity date matching the maturity date of the 2019 Notes. The interest rate swaps effectively change the fixed-rate interest on the Senior 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 Senior Notes, and makes quarterly variable-rate interest payments based on three-month LIBOR plus (a) 0.9693% for the swap on the 2012 Notes, (b) 1.245% for the swap on the 2014 Notes and (c) 2.3745% for the swap on the 2019 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 three months ended December 31, 2010, the Company recorded a $19.5 million loss for the change in fair value of the interest rate swaps on the 2012 Notes and 2014 Notes and an offsetting $19.5 million fair value gain 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):


	December 31,		September 30,
	2010		2010
Derivatives recorded under the caption Other assets:
Interest rate swap assets	$	29,720	$	49,235

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 agreements related to the interest rate swaps require 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 December 31, 2010 and September 30, 2010, the interest rate swap counterparty for the 2012 Notes and 2014 Notes had pledged $31.2 million and $52.9 million of collateral, respectively, to the Company in the form of U.S. Treasury securities.

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):


	December 31, 2010						September 30, 2010
			Minimum						Minimum
			Net Capital		Excess				Net Capital		Excess
	Net Capital		Required		Net Capital		Net Capital		Required		Net Capital
TD Ameritrade Clearing, Inc.	$	1,190,298	$	188,917	$	1,001,381	$	1,092,692	$	177,644	$	915,048
TD Ameritrade, Inc.		223,410		1,000		222,410		142,859		1,000		141,859
Bellevue Chicago, LLC		N/A		N/A		N/A		39,039		250		38,789

Totals	$	1,413,708	$	189,917	$	1,223,791	$	1,274,590	$	178,894	$	1,095,696

TD Ameritrade Clearing, Inc. (“TDAC”) is a clearing broker-dealer and TD Ameritrade, Inc. is an introducing broker-dealer. Prior to October 12, 2010, Bellevue Chicago, LLC (formerly thinkorswim, Inc.) was registered as an introducing broker-dealer. On May 25, 2010, Bellevue Chicago, LLC transferred its introducing broker-dealer business to TD Ameritrade, Inc. On October 12, 2010, the Company withdrew Bellevue Chicago, LLC’s registration as a broker-dealer.

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 $22.0 million and $22.3 million as of December 31, 2010 and September 30, 2010, respectively, which exceeded the required Tier 1 capital by $12.0 million and $12.3 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 TD Ameritrade, 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. On December 20, 2010, TD Ameritrade, Inc. received preliminary Court approval of a proposed class settlement agreement between TD Ameritrade, Inc. and plaintiffs Richard Holober and Brad Zigler. Under the proposed settlement, the Company will pay no less than $2.5 million in settlement benefits. Total compensation to be paid to all eligible members of the settlement class will not exceed $6.5 million, inclusive of any award of attorneys’ fees and costs. In addition, the settlement agreement provides that the Company will retain an independent information technology security consultant to assess whether the Company has met certain information technology security standards. The proposed settlement is subject to final approval by the Court. A hearing on final approval of the proposed settlement is scheduled for April 7, 2011.

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. TD Ameritrade, 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 TD Ameritrade, Inc. clients’ current positions held in the Reserve Yield Plus Fund amount to approximately 79% of the fund, which, if valued based on a $1.00 per share net asset value, would total approximately $47.3 million.

TD Ameritrade, Inc. has received subpoenas and other requests for documents and information from the SEC and other regulatory authorities regarding TD Ameritrade, Inc.’s offering of the Yield Plus Fund to clients. TD Ameritrade, Inc. is cooperating with the investigations and requests. On January 27, 2011, TD Ameritrade, Inc. entered into a settlement with the SEC, agreeing to the entry of an “Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions” (“Order”). In the Order, the SEC finds that TD Ameritrade, Inc. failed reasonably to supervise its registered representatives with a view to preventing their violations of Section 17(a)(2) of the Securities Act of 1933 in connection with their offer and sale of the Yield Plus Fund. TD Ameritrade, Inc. did not admit or deny any of the findings in the Order, and no fine was imposed. Under the settlement agreement, TD Ameritrade, Inc. agreed to pay $0.012 per share to all eligible current or former clients that purchased shares of the Yield Plus Fund and continue to own those shares. Clients that purchased Yield Plus Fund shares through independent registered investment advisors are not eligible for the payment. The Company estimates that payments to clients under the settlement will total approximately $10 million. The Company had approximately $10 million accrued for this matter as of December 31, 2010.

The Pennsylvania Securities Commission has filed an administrative order against TD Ameritrade, Inc. 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. TD Ameritrade, Inc. is defending the action.

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 motions are pending.

The Company is unable to predict the outcome or the timing of the ultimate resolution of the Pennsylvania action and the Ross lawsuit, or the potential loss, if any, that may result from these unresolved matters. However, management believes 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.

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 in January 2006.

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 December 31, 2010, client excess margin securities of approximately $11.5 billion and stock borrowings of approximately $0.7 billion were available to the Company to utilize as collateral on various borrowings or for other purposes. The Company had loaned approximately $1.8 billion and repledged approximately $1.2 billion of that collateral as of December 31, 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 12 for a description of a guarantee included in that agreement.

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

Accounting Standards Codification (“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 December 31, 2010 and September 30, 2010 (dollars in thousands):


	As of December 31, 2010
	Level 1		Level 2		Level 3		Fair Value
Assets:
Short-term investments:
U.S. government securities	$	—	$	2,496	$	—	$	2,496
U.S. government agency debt securities		—		1,099		—		1,099

Subtotal — Short-term investments		—		3,595		—		3,595


Securities owned:
Auction rate securities		—		—		194,523		194,523
Money market and other mutual funds		—		—		970		970
Equity securities		864		224		—		1,088
Municipal debt securities		—		542		—		542
Corporate debt securities		—		534		—		534
Other debt securities		—		684		—		684

Subtotal — Securities owned		864		1,984		195,493		198,341


Other assets:
Interest rate swaps ⁽¹⁾		—		29,720		—		29,720

Total assets at fair value	$	864	$	35,299	$	195,493	$	231,656


Liabilities:
Securities sold, not yet purchased:
Equity securities	$	14,042	$	18	$	—	$	14,060
Municipal debt securities		—		124		—		124
Corporate debt securities		—		15		—		15
Other debt securities		—		127		—		127

Total — Securities sold, not yet purchased ⁽²⁾	$	14,042	$	284	$	—	$	14,326


(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, 2010
	Level 1		Level 2		Level 3		Fair Value
Assets:
Short-term investments:
U.S. government securities	$	—	$	2,494	$	—	$	2,494
U.S. government agency debt securities		—		1,098		—		1,098

Subtotal — Short-term investments		—		3,592		—		3,592


Securities owned:
Auction rate securities		—		—		209,288		209,288
Money market and other mutual funds		—		—		5,404		5,404
Equity securities		453		10		—		463
Municipal debt securities		—		1,487		—		1,487
Corporate debt securities		—		487		—		487
Other debt securities		—		105		—		105

Subtotal — Securities owned		453		2,089		214,692		217,234

Other assets:
Interest rate swaps ⁽¹⁾		—		49,235		—		49,235

Total assets at fair value	$	453	$	54,916	$	214,692	$	270,061


Liabilities:
Securities sold, not yet purchased:
Equity securities	$	2,213	$	14	$	—	$	2,227
Municipal debt securities		—		375		—		375
Corporate debt securities		—		378		—		378
Other debt securities		—		161		—		161

Total — Securities sold, not yet purchased ⁽²⁾	$	2,213	$	928	$	—	$	3,141


(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.

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 ended December 31, 2010 and 2009 (dollars in thousands):


	Three Months Ended December 31, 2010
					Purchases,
			Net Gains		Sales,
	September 30,		Included in		Issuances and			December 31,
	2010		Earnings ⁽¹⁾		Settlements, Net			2010
Assets:
Securities owned:
Auction rate securities	$	209,288	$	379	$	(15,144	)	$	194,523
Money market and other mutual funds		5,404		—		(4,434	)		970

Total — Securities owned	$	214,692	$	379	$	(19,578	)	$	195,493


(1)		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 December 31, 2010.


	Three Months Ended December 31, 2009
					Purchases,
			Net Gains		Sales,
	September 30,		Included in		Issuances and			December 31,
	2009		Earnings ⁽¹⁾		Settlements, Net			2009
Assets:
Short-term investments:
Money market mutual funds	$	50,971	$	—	$	(11,594	)	$	39,377
Securities owned:
Auction rate securities		14,579		371		251,707			266,657
Money market and other mutual funds		5,049		—		(442	)		4,607

Subtotal — Securities owned		19,628		371		251,265			271,264


Total assets at fair value	$	70,599	$	371	$	239,671		$	310,641


(1)		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 December 31, 2009.

There were no nonfinancial assets or liabilities measured at fair value during the three months ended December 31, 2010 and 2009.

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 incorporates interest rate yield curves, which are observable for substantially the full term of the contract. The valuation 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”) — 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 an estimated 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 Senior Notes

As of December 31, 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, 2010, the Company’s Senior Notes had an aggregate estimated fair value, based on quoted market prices, of approximately $1.34 billion, compared to the aggregate carrying value of the Senior Notes on the Condensed Consolidated Balance Sheet of $1.30 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 December 31,
	2010		2009
Net income	$	145,039	$	136,237


Weighted average shares outstanding — basic		575,485		587,843
Effect of dilutive securities:
Common stock equivalent shares related to stock-based compensation		5,758		7,791


Weighted average shares outstanding — diluted		581,243		595,634

Earnings per share — basic	$	0.25	$	0.23
Earnings per share — diluted	$	0.25	$	0.23

10. COMPREHENSIVE INCOME

Comprehensive income is as follows (dollars in thousands):


	Three Months Ended December 31,
	2010		2009
Net income	$	145,039	$	136,237

Other comprehensive income:
Foreign currency translation adjustment		131		18


Comprehensive income	$	145,170	$	136,255

11. STRUCTURED STOCK REPURCHASE

On August 20, 2010, the Company entered into an agreement with an investment bank counterparty to effect a structured repurchase of up to 12 million shares of its common stock. The Company entered into this structured stock repurchase agreement in order to lower the average cost of acquiring shares of its common stock. Under the terms of the agreement, the Company prepaid $169.2 million to the counterparty, which was recorded as a reduction of additional paid-in capital on the Condensed Consolidated Balance Sheet. Settlement of the transaction occurred on December 1, 2010 and the Company purchased approximately 3.2 million shares for approximately $50.4 million ($15.94 per share). The number of shares the Company purchased from the counterparty and the purchase price were based on the average of the daily volume-weighted average share price of the Company’s common stock over the measurement period for the transaction, less a pre-determined discount. Upon settlement of the transaction, the excess prepayment amount of $118.8 million was returned to the Company in cash and was recorded as additional paid-in capital.

12. 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 46.1% of the Company’s common stock as of December 31, 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 of 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 with TD Bank USA, N.A. (“TD Bank USA”), TD Bank, N.A. and TD. Under the IDA agreement, TD Bank USA and TD Bank, N.A. (together, 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 the Depository Institutions 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 December 2010, the IDA portfolio was comprised of approximately 5% component (a) investments, 87% 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 $178.5 million and $155.3 million for the three months ended December 31, 2010 and 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 $3.6 million and $2.8 million for the three months ended December 31, 2010 and 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 $0.6 million and $1.2 million of receivables from TDSI as of December 31, 2010 and September 30, 2010, respectively. Payable to brokers, dealers and clearing organizations includes $86.5 million and $40.8 million of payables to TDSI as of December 31, 2010 and September 30, 2010, respectively. The Company earned net interest revenue of $0.9 million and $0.4 million for the three months ended December 31, 2010 and 2009, respectively, associated with securities borrowing and lending with TDSI. The transactions with TDSI are subject to the same collateral requirements as transactions with other counterparties.

Referral and Strategic Alliance Agreement

TD Ameritrade, Inc. is a party to a referral and strategic alliance agreement with TD Bank, N.A. and TD Wealth Management Services, Inc. (“TDWMS”). The strategic alliance agreement has a term of five years beginning February 1, 2010 and is automatically renewable for successive three-year terms, provided that it may be terminated by any party after January 1, 2011 upon 180 days’ prior written notice. Under the agreement, TD Bank, N.A. will promote TD Ameritrade, Inc.’s brokerage services to its clients using a variety of marketing and referral programs and TDWMS referred its existing brokerage account clients to TD Ameritrade, Inc. while TDWMS discontinued its brokerage operations. TD Bank, N.A. clients that open brokerage accounts at TD Ameritrade, Inc. and TDWMS clients that elected to transfer their accounts to TD Ameritrade, Inc. are considered program clients. TD Ameritrade, Inc. retains a fee for providing brokerage services to the program clients, and the program’s net margin is shared equally between TD Ameritrade, Inc. and TD Bank, N.A. The Company earned pre-tax income associated with the referral and strategic alliance agreement of $0.2 million for the three months ended December 31, 2010.

Cash Management Services Agreement

Pursuant to a cash management services agreement, TD Bank USA provides cash management services to clients of TD Ameritrade, 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 December 31, 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 TD Ameritrade, 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 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 TD. There were 8,600 and 23,930 SARs outstanding as of December 31, 2010 and September 30, 2010, respectively, with an approximate value of 0.5 million and $1.1 million, respectively. The indemnification agreement effectively protects the Company against fluctuations in TD’s common stock price with respect to the SARs, so there is 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 TD Ameritrade, 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 $4.3 million for the three months ended December 31, 2010 and 2009, which is included in professional services expense on the Condensed Consolidated Statements of Income.

TD Waterhouse Canada Order Routing Agreement

TDAC is a party to an order routing agreement with TD Waterhouse Canada Inc. (“TDW Canada”), a wholly-owned subsidiary of TD. The agreement has a term of four years beginning May 20, 2010, provided that it may be terminated by either party upon 90 days’ prior written notice. Under the agreement, TDAC provides TDW Canada order routing services for U.S. equity and option orders to U.S. brokers and market centers with which TDW Canada has order execution arrangements. TDAC retains a percentage of the net payment for order flow revenue it receives on TDW Canada trades and remits the remainder to TDW Canada. The Company earned net payment for order flow revenue associated with the order routing

agreement of $0.6 million for the three months ended December 31, 2010, which is included in other revenues on the Condensed Consolidated Statements of Income.

TD Waterhouse UK Servicing Agreement

TDAC is a party to a servicing agreement with TD Waterhouse Investor Services (Europe) Limited (“TDW UK”). The agreement has an initial term of ten years beginning July 16, 2010 and will automatically renew for consecutive two year terms, provided that either party may give written notice of its intent not to renew at least 180 days prior to the end of the initial term or any renewal term. Under the agreement, TDAC provides clearing services to clients of TDW UK that trade in U.S. equity securities. In exchange for such services, TDW UK pays TDAC a per trade commission. The Company earned commission revenues associated with the servicing agreement of $0.1 million for the three months ended December 31, 2010, which is included in commissions and transaction fees on the Condensed Consolidated Statements of Income.

Certificates of Deposit Brokerage Agreement

TD Ameritrade, Inc. is party to a certificates of deposit brokerage agreement with TD Bank USA, under which TD Ameritrade, Inc. acts as agent for its clients in purchasing certificates of deposit from TD Bank USA. Under the agreement, TD Bank USA pays TD Ameritrade, Inc. a placement fee for each certificate of deposit issued in an amount agreed to by both parties. TD Ameritrade, 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 TD Ameritrade, Inc. brokerage account during a specified time period. Under these promotions, TD Ameritrade, 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 these promotional offers of $1.0 million for the three months ended December 31, 2010 and 2009, which is included in advertising expense on the Condensed Consolidated Statements of Income.

Trading Platform Hosting and Services Agreement

On June 11, 2009, immediately following the closing of the Company’s acquisition of thinkorswim Group Inc. (“thinkorswim”), the Company completed the sale of thinkorswim Canada, Inc. (“thinkorswim Canada”) to TDW 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 TD Ameritrade, Inc. provides the services to support the platform. In consideration for the performance by TD Ameritrade, Inc. of all its obligations under this agreement, TDW Canada pays TD Ameritrade, 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 December 31, 2010 and September 30, 2010, $9.6 million and $9.7 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 TD Ameritrade, Inc. client orders to the exchanges. The Company earned $0.5 million of payment for order flow revenues from TD Options LLC for the three months ended December 31, 2009, 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.

13. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Senior Notes are jointly and severally and fully and unconditionally guaranteed by TD Ameritrade Online Holdings Corp. (“TDAOH”), a wholly-owned subsidiary of the Company. 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 DECEMBER 31, 2010
(Unaudited)
(In thousands)


			Guarantor		Non-Guarantor
	Parent		Subsidiary		Subsidiaries		Eliminations			Total
ASSETS
Cash and cash equivalents	$	125,602	$	29,943	$	737,838	$	—		$	893,383
Cash and investments segregated in compliance with federal regulations		—		—		527,343		—			527,343
Receivable from brokers, dealers and clearing organizations		—		—		944,822		—			944,822
Receivable from clients, net of allowance for doubtful accounts		—		—		8,315,435		—			8,315,435
Investments in subsidiaries		5,349,383		4,899,983		552,128		(10,801,494	)		—
Receivable from affiliates		843		213,975		109,711		(224,103	)		100,426
Goodwill		—		—		2,467,013		—			2,467,013
Acquired intangible assets		—		145,674		951,213		—			1,096,887
Other		66,971		5,535		640,976		(26,149	)		687,333


Total assets	$	5,542,799	$	5,295,110	$	15,246,479	$	(11,051,746	)	$	15,032,642


LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Payable to brokers, dealers and clearing organizations	$	—	$	—	$	1,797,810	$	—		$	1,797,810
Payable to clients		—		—		7,011,564		—			7,011,564
Accounts payable and accrued liabilities		96,538		18,217		381,337		(5,258	)		490,834
Payable to affiliates		148,341		1,771		77,595		(224,103	)		3,604
Long-term debt		1,278,555		—		4,262		—			1,282,817
Other		—		42,319		405,220		(20,891	)		426,648

Total liabilities		1,523,434		62,307		9,677,788		(250,252	)		11,013,277

Stockholders’ equity		4,019,365		5,232,803		5,568,691		(10,801,494	)		4,019,365


Total liabilities and stockholders’ equity	$	5,542,799	$	5,295,110	$	15,246,479	$	(11,051,746	)	$	15,032,642

TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF SEPTEMBER 30, 2010
(Unaudited)
(In thousands)


			Guarantor		Non-Guarantor
	Parent		Subsidiary		Subsidiaries		Eliminations			Total
ASSETS
Cash and cash equivalents	$	67,033	$	25,058	$	649,401	$	—		$	741,492
Cash and investments segregated in compliance with federal regulations		—		—		994,026		—			994,026
Receivable from brokers, dealers and clearing organizations		—		—		1,207,723		—			1,207,723
Receivable from clients, net of allowance for doubtful accounts		—		—		7,391,432		—			7,391,432
Investments in subsidiaries		5,180,736		4,751,641		543,556		(10,475,933	)		—
Receivable from affiliates		1,782		218,437		128,147		(255,420	)		92,946
Goodwill		—		—		2,467,013		—			2,467,013
Acquired intangible assets		—		145,674		978,585		—			1,124,259
Other		91,057		5,902		640,744		(29,676	)		708,027


Total assets	$	5,340,608	$	5,146,712	$	15,000,627	$	(10,761,029	)	$	14,726,918


LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Payable to brokers, dealers and clearing organizations	$	—	$	—	$	1,934,315	$	—		$	1,934,315
Payable to clients		—		—		6,810,391		—			6,810,391
Accounts payable and accrued liabilities		96,578		18,157		366,789		(5,218	)		476,306
Payable to affiliates		174,144		1,845		82,675		(255,420	)		3,244
Long-term debt		1,298,007		—		4,262		—			1,302,269
Other		—		42,563		410,409		(24,458	)		428,514

Total liabilities		1,568,729		62,565		9,608,841		(285,096	)		10,955,039

Stockholders’ equity		3,771,879		5,084,147		5,391,786		(10,475,933	)		3,771,879


Total liabilities and stockholders’ equity	$	5,340,608	$	5,146,712	$	15,000,627	$	(10,761,029	)	$	14,726,918

TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED DECEMBER 31, 2010
(Unaudited)
(In thousands)


				Guarantor			Non-Guarantor
	Parent			Subsidiary			Subsidiaries		Eliminations			Total
Net revenues	$	3,825		$	62		$	656,174	$	(3,871	)	$	656,190
Operating expenses		3,613			63			422,298		(3,871	)		422,103

Operating income (loss)		212			(1	)		233,876		—			234,087
Other expense		10,748			—			77		—			10,825

Income (loss) before income taxes and equity in income of subsidiaries		(10,536	)		(1	)		233,799		—			223,262
Provision for (benefit from) income taxes		(7,058	)		(316	)		85,597		—			78,223

Income (loss) before equity in income of subsidiaries		(3,478	)		315			148,202		—			145,039
Equity in income of subsidiaries		148,517			151,123			8,572		(308,212	)		—

Net income	$	145,039		$	151,438		$	156,774	$	(308,212	)	$	145,039

TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED DECEMBER 31, 2009
(Unaudited)
(In thousands)


				Guarantor			Non-Guarantor
	Parent			Subsidiary			Subsidiaries		Eliminations			Total
Net revenues	$	4,767		$	46		$	624,599	$	(4,794	)	$	624,618
Operating expenses		2,315			302			386,395		(4,794	)		384,218

Operating income (loss)		2,452			(256	)		238,204		—			240,400
Other expense		19,646			—			375		—			20,021

Income (loss) before income taxes and equity in income of subsidiaries		(17,194	)		(256	)		237,829		—			220,379
Provision for (benefit from) income taxes		(4,273	)		(93	)		88,508		—			84,142

Income (loss) before equity in income of subsidiaries		(12,921	)		(163	)		149,321		—			136,237
Equity in income of subsidiaries		149,158			149,486			—		(298,644	)		—

Net income	$	136,237		$	149,323		$	149,321	$	(298,644	)	$	136,237

TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 2010
(Unaudited)
(In thousands)


				Guarantor		Non-Guarantor
	Parent			Subsidiary		Subsidiaries			Total
Net cash provided by (used in) operating activities	$	(14,903	)	$	4,885	$	95,247		$	85,229
Cash flows from investing activities:
Purchase of property and equipment		—			—		(30,225	)		(30,225	)
Cash received in sale of business		—			—		5,228			5,228

Net cash used in investing activities		—			—		(24,997	)		(24,997	)

Cash flows from financing activities:
Purchase of treasury stock		(2,034	)		—		—			(2,034	)
Return of prepayment on structured stock repurchase		118,834			—		—			118,834
Payment of cash dividends		(28,680	)		—		—			(28,680	)
Other		5,352			—		(1,945	)		3,407

Net cash provided by (used in) financing activities		93,472			—		(1,945	)		91,527

Intercompany investing and financing activities, net		(20,000	)		—		20,000			—
Effect of exchange rate changes on cash and cash equivalents		—			—		132			132

Net increase in cash and cash equivalents		58,569			4,885		88,437			151,891
Cash and cash equivalents at beginning of period		67,033			25,058		649,401			741,492

Cash and cash equivalents at end of period	$	125,602		$	29,943	$	737,838		$	893,383

TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 2009
(Unaudited)
(In thousands)


				Guarantor			Non-Guarantor
	Parent			Subsidiary			Subsidiaries			Total
Net cash provided by (used in) operating activities	$	(24,891	)	$	(6,142	)	$	316,667		$	285,634
Cash flows from investing activities:
Purchase of property and equipment		—			—			(20,797	)		(20,797	)
Proceeds from redemption of money market funds		24			11,124			446			11,594

Net cash provided by (used in) investing activities		24			11,124			(20,351	)		(9,203	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt		1,248,557			—			—			1,248,557
Payment of debt issuance costs		(10,032	)		—			—			(10,032	)
Principal payments on long-term debt		(1,406,500	)		—			—			(1,406,500	)
Purchase of treasury stock		(3,229	)		—			—			(3,229	)
Other		11,155			—			(3,718	)		7,437

Net cash used in financing activities		(160,049	)		—			(3,718	)		(163,767	)

Intercompany investing and financing activities, net		165,000			(75,000	)		(90,000	)		—
Effect of exchange rate changes on cash and cash equivalents		—			—			16			16

Net increase (decrease) in cash and cash equivalents		(19,916	)		(70,018	)		202,614			112,680
Cash and cash equivalents at beginning of period		45,291			109,079			636,841			791,211

Cash and cash equivalents at end of period	$	25,375		$	39,061		$	839,455		$	903,891

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, 2010, 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; the effect of our migration of client cash balances into the insured deposit account offering; our effective income tax rate; and our capital and liquidity needs and our plans to finance such needs.

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; fluctuations in interest rates; stock market fluctuations and changes in client trading activity; credit risk with clients and counterparties; increased competition; systems failures and capacity constraints; network security risks; our ability to service debt obligations; our ability to achieve the benefits of the thinkorswim Group Inc. (“thinkorswim”) acquisition; new laws and regulations affecting our business; 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, 2010. 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, 2010, 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, 2010.

Unless otherwise indicated, the terms “we,” “us,” “our” 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, 2010. Since the issuance of our Form 10-K, the definition of “Liquid assets” has been renamed “Liquid assets — regulatory threshold” and “Liquid assets — management target” was added as a new metric. We consider our liquid assets metrics to be important measures of our liquidity. Liquid assets — management target reflects our liquidity that would be readily available for corporate investing and financing activities under normal operating circumstances, while liquid assets — regulatory threshold reflects our liquidity that would be available under unusual operating circumstances. In addition to the updated liquid assets metrics, we added “Average client trades per funded account (annualized)” as a new metric. The updated definitions are as follows ( italics within a definition indicate other defined terms that appear elsewhere in the Glossary):

Average client trades per funded account (annualized) — Total trades divided by the average number of funded accounts during the period, annualized based on the number of trading days in the fiscal year.

Liquid assets — management target — Liquid assets — management target is a non-GAAP financial measure. We define liquid assets — management target as the sum of (a) corporate cash and cash equivalents, (b) corporate short-term investments and (c) regulatory net capital of (i) our clearing broker-dealer subsidiary in excess of 10% of aggregate debit items and (ii) our introducing broker-dealer subsidiaries in excess of a minimum operational target established by management ($50 million in the case of our primary introducing broker-dealer, TD Ameritrade, Inc.). We include the excess capital of our broker-dealer subsidiaries in liquid assets — management target, rather than simply including broker-dealer cash and cash equivalents, because capital requirements may limit the amount of cash available for dividend from the broker-dealer subsidiaries to the parent company. Excess capital, as defined under clause (c) above, is generally available for dividend from the broker-dealer subsidiaries to the parent company. We consider liquid assets — management target to be a measure that reflects our liquidity that would be readily available for corporate investing and financing activities under normal operating circumstances. Liquid assets — regulatory threshold is a related metric that reflects our liquidity that would be available for corporate investing and financing activities under unusual operating circumstances. Our liquid assets metrics should be considered as supplemental measures of liquidity, rather than as substitutes for cash and cash equivalents.

Liquid assets — regulatory threshold — Liquid assets — regulatory threshold is a non-GAAP financial measure. We define liquid assets — regulatory threshold 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 — regulatory threshold, rather than simply including broker-dealer and trust company cash and cash equivalents, because capital requirements may limit the amount of cash available for dividend from the broker-dealer and trust company 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. We consider liquid assets — regulatory threshold to be a measure that reflects our liquidity that would be available for corporate investing and financing activities under unusual operating circumstances. Liquid assets — management target is a related metric that reflects our liquidity that would be readily available for corporate investing and financing activities under normal operating circumstances. Our liquid assets metrics should be considered as supplemental measures of liquidity, rather than as substitutes for cash and cash equivalents.

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 significantly 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 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 December 31,
	2010						2009
				% of Net						% of Net
EBITDA	$			Revenue			$			Revenue
EBITDA	$	274,814			41.9	%	$	271,198			43.4	%
Less:
Depreciation and amortization		(16,136	)		(2.5	%)		(13,610	)		(2.2	%)
Amortization of acquired intangible assets		(24,591	)		(3.7	%)		(25,580	)		(4.1	%)
Interest on borrowings		(10,825	)		(1.6	%)		(11,629	)		(1.9	%)
Provision for income taxes		(78,223	)		(11.9	%)		(84,142	)		(13.5	%)

Net income	$	145,039			22.1	%	$	136,237			21.8	%

Our EBITDA increased slightly for the first quarter of fiscal 2011 compared to the first quarter of fiscal 2010 primarily due to a 5% increase in net revenues and the effect of an $8.4 million loss on debt refinancing during the first quarter of fiscal 2010, substantially offset by a 10% increase in total operating expenses. The increase in net revenues was due primarily to growth in average spread-based balances, partially offset by lower net interest margin earned on the spread-based balances and lower average commissions and transaction fees per trade. The increase in total operating expenses was due primarily to increases in employee compensation and benefits, advertising and professional services expenses. Detailed analysis of net revenues and operating expenses is presented later in this discussion.

Operating Metrics

Our largest sources of revenues are asset-based revenues and transaction-based revenues. For the three months ended December 31, 2010, asset-based revenues and transaction-based revenues accounted for 51% and 45% 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
	December 31,						Increase/
	2010			2009			(Decrease)
Avg. interest-earning assets (excluding conduit business)	$	12,972		$	15,522		$	(2,550	)
Avg. insured deposit account balances		44,735			32,578			12,157

Avg. spread-based balances	$	57,707		$	48,100		$	9,607


Net interest revenue (excluding conduit business)	$	115.4		$	99.2		$	16.2
Insured deposit account fee revenue		178.5			155.3			23.2

Spread-based revenue	$	293.9		$	254.5		$	39.4


Avg. annualized yield — interest-earning assets (excluding conduit business)		3.48	%		2.50	%		0.98	%
Avg. annualized yield — insured deposit account fees		1.56	%		1.87	%		(0.31	%)
Net interest margin (NIM)		1.99	%		2.07	%		(0.08	%)

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)
	Three months ended
	December 31,						Increase/
	2010			2009			(Decrease)
Segregated cash	$	1.1		$	2.6		$	(1.5	)
Client margin balances		92.8			74.7			18.1
Securities borrowing (excluding conduit business)		22.3			23.0			(0.7	)
Other cash and interest-earning investments, net		0.2			0.3			(0.1	)
Client credit balances		(0.5	)		(1.1	)		0.6
Securities lending (excluding conduit business)		(0.5	)		(0.3	)		(0.2	)

Net interest revenue (excluding conduit business)		115.4			99.2			16.2

Securities borrowing — conduit business		0.2			0.5			(0.3	)
Securities lending — conduit business		(0.1	)		(0.3	)		0.2

Net interest revenue	$	115.5		$	99.4		$	16.1


	Average Balance
	Three months ended
	December 31,				%
	2010		2009		Change
Segregated cash	$	3,266	$	7,823		(58	%)
Client margin balances		8,121		6,081		34	%
Securities borrowing (excluding conduit business)		532		745		(29	%)
Other cash and interest-earning investments		1,053		873		21	%

Interest-earning assets (excluding conduit business)		12,972		15,522		(16	%)
Securities borrowing — conduit business		359		561		(36	%)

Interest-earning assets	$	13,331	$	16,083		(17	%)


Client credit balances	$	7,970	$	10,901		(27	%)
Securities lending (excluding conduit business)		1,601		1,593		1	%

Interest-bearing liabilities (excluding conduit business)		9,571		12,494		(23	%)
Securities lending — conduit business		359		561		(36	%)

Interest-bearing liabilities	$	9,930	$	13,055		(24	%)


	Avg. Annualized Yield (Cost)
	Three months ended						Net Yield
	December 31,						Increase/
	2010			2009			(Decrease)
Segregated cash		0.13	%		0.13	%		0.00	%
Client margin balances		4.47	%		4.81	%		(0.34	%)
Other cash and interest-earning investments, net		0.09	%		0.12	%		(0.03	%)
Client credit balances		(0.03	%)		(0.04	%)		0.01	%

Net interest revenue (excluding conduit business)		3.48	%		2.50	%		0.98	%

Securities borrowing — conduit business		0.28	%		0.35	%		(0.07	%)
Securities lending — conduit business		(0.13	%)		(0.22	%)		0.09	%

Net interest revenue		3.39	%		2.42	%		0.97	%

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


	Fee Revenue
	Three months ended
	December 31,				Increase/
	2010		2009		(Decrease)
Money market mutual fund	$	3.6	$	2.8	$	0.8
Other investment product fees		37.1		26.6	$	10.5

Total investment product fees	$	40.7	$	29.4	$	11.3


	Average Balance
	Three months ended
	December 31,				%
	2010		2009		Change
Money market mutual fund	$	8,837	$	11,942		(26	%)
Other fee-based investment balances		63,908		46,516		37	%

Total fee-based investment balances	$	72,745	$	58,458		24	%


	Average Annualized Yield
	Three months ended
	December 31,						Increase/
	2010			2009			(Decrease)
Money market mutual fund		0.16	%		0.09	%		0.07	%
Other investment product fees		0.23	%		0.22	%		0.01	%
Total investment product fees		0.22	%		0.20	%		0.02	%

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
	December 31,						%
	2010			2009			Change
Total trades (in millions)		23.62			23.85			(1	%)
Average commissions and transaction fees per trade ⁽¹⁾	$	12.39		$	12.98			(5	%)
Average client trades per day		371,916			378,561			(2	%)
Average client trades per total account (annualized)		11.8			12.5			(6	%)
Average client trades per funded account (annualized)		17.2			17.9			(4	%)
Activity rate — total accounts		4.7	%		5.0	%		(6	%)
Activity rate — funded accounts		6.8	%		7.1	%		(4	%)
Trading days		63.5			63.0			1	%


(1)		Average commissions and transaction fees per trade excludes thinkorswim active trader and TD Waterhouse UK businesses.

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
	December 31,						%
	2010			2009			Change
Total accounts (beginning of period)		7,946,000			7,563,000			5	%
New accounts opened		164,000			180,000			(9	%)
Accounts closed		(73,000	)		(68,000	)		7	%

Total accounts (end of period)		8,037,000			7,675,000			5	%

Percentage change during period		1	%		1	%

Funded accounts (beginning of period)		5,455,000			5,279,000			3	%
Funded accounts (end of period)		5,491,000			5,327,000			3	%
Percentage change during period		1	%		1	%

Client assets (beginning of period, in billions)	$	354.8		$	302.0			17	%
Client assets (end of period, in billions)	$	386.4		$	318.6			21	%
Percentage change during period		9	%		5	%

Net new assets (in billions)	$	9.7		$	8.7			11	%
Net new assets annualized growth rate ⁽¹⁾		11	%		12	%		(6	%)


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

Condensed 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
	December 31,						%
	2010			2009			Change
Revenues:
Transaction-based revenues:
Commissions and transaction fees	$	292.7		$	309.4			(5	%)

Asset-based revenues:
Interest revenue		116.8			101.2			15	%
Brokerage interest expense		(1.3	)		(1.8	)		(29	%)

Net interest revenue		115.5			99.4			16	%

Insured deposit account fees		178.5			155.3			15	%
Investment product fees		40.7			29.4			38	%

Total asset-based revenues		334.7			284.2			18	%
Other revenues		28.8			31.1			(7	%)

Net revenues		656.2			624.6			5	%


Operating expenses:
Employee compensation and benefits		162.4			146.6			11	%
Clearing and execution costs		23.8			21.9			9	%
Communications		26.9			24.7			9	%
Occupancy and equipment costs		35.2			34.9			1	%
Depreciation and amortization		16.1			13.6			19	%
Amortization of acquired intangible assets		24.6			25.6			(4	%)
Professional services		40.3			33.7			20	%
Advertising		74.6			65.2			14	%
Other		18.2			18.0			1	%


Total operating expenses		422.1			384.2			10	%


Operating income		234.1			240.4			(3	%)

Other expense:
Interest on borrowings		10.8			11.6			(7	%)
Loss on debt refinancing		—			8.4			(100	%)

Total other expense		10.8			20.0			(46	%)


Pre-tax income		223.3			220.4			1	%
Provision for income taxes		78.2			84.1			(7	%)


Net income	$	145.0		$	136.2			6	%


Other information:
Effective income tax rate		35.0	%		38.2	%
Average debt outstanding	$	1,273.2		$	1,378.3			(8	%)
Average interest rate incurred on borrowings		3.09	%		2.94	%

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 December 31, 2010 and 2009

Net Revenues

Commissions and transaction fees decreased 5% to $292.7 million, primarily due to lower average commissions and transaction fees per trade and slightly lower average client trades per day. Average commissions and transaction fees per trade decreased to $12.39 per trade for the first quarter of fiscal 2011 from $12.98 for the first quarter of fiscal 2010, primarily due to lower payment for order flow revenue per trade and the mix of client trading activity during the first quarter of fiscal 2011. Average client trades per day decreased 2% to 371,916 for the first quarter of fiscal 2011 compared to 378,561 for the first quarter of fiscal 2010. Average client trades per funded account (annualized) were 17.2 for the first quarter of fiscal 2011 compared to 17.9 for the first quarter of fiscal 2010.

Net interest revenue increased 16% to $115.5 million, due primarily to a 34% increase in average client margin balances, partially offset by a decrease of 34 basis points in the average yield earned on client margin balances for the first quarter of fiscal 2011 compared to the first quarter of fiscal 2010.

Insured deposit account fees increased 15% to $178.5 million, due primarily to a 37% increase in average client insured deposit account balances during the first quarter of fiscal 2011 compared to the first quarter of fiscal 2010. The increased insured deposit account balances are partly due to our success in attracting net new client assets over the past year and partly 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. We began migrating client cash in April 2009 and completed the program in January 2010. 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 31 basis points in the average yield earned on the insured deposit account assets during the first quarter of fiscal 2011.

Investment product fees increased 38% to $40.7 million, primarily due to a 37% increase in average other fee-based investment balances and an increase of 7 basis points in the average yield earned on client money market mutual fund balances, partially offset by a 26% decrease in average money market mutual fund balances in the first quarter of fiscal 2011 compared to the first quarter of fiscal 2010. The decrease in average money market mutual fund balances resulted primarily from our client cash migration strategy discussed above.

Operating Expenses

Employee compensation and benefits expense increased 11% to $162.4 million, primarily due to higher incentive-based compensation related to Company and individual performance, including our continued success in attracting net new client assets, in the first quarter of fiscal 2011 compared to the first quarter of fiscal 2010. The average number of full-time equivalent employees was 5,257 for the first quarter of fiscal 2011 compared to 5,240 for the first quarter of fiscal 2010.

Clearing and execution costs increased 9% to $23.8 million, due primarily to an increase in outsourced clearing fees for our thinkorswim business in the first quarter of fiscal 2011 compared to the first quarter of fiscal 2010.

Communications expense increased 9% to $26.9 million, due primarily to increased costs for quotes and market information during the first quarter of fiscal 2011 compared to the first quarter of fiscal 2010.

Depreciation and amortization increased 19% to $16.1 million, due primarily to depreciation on recent technology infrastructure upgrades and leasehold improvements.

Professional services increased 20% to $40.3 million, primarily due to higher usage of consulting and contract services during the first quarter of fiscal 2011 compared to the first quarter of fiscal 2010 in connection with new product development, technology infrastructure upgrades and the integration of thinkorswim.

Advertising expense increased 14% to $74.6 million, primarily due to the timing of more marketing campaigns earlier in the year during fiscal 2011 compared to fiscal 2010. 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.

Other Expenses and Income Taxes

Interest on borrowings decreased 7% to $10.8 million, due primarily to a decrease of approximately $105 million in average debt outstanding, partially offset by higher average interest rates incurred on our debt during the first quarter of fiscal 2011 compared to the first quarter of fiscal 2010. The average interest rate incurred on our debt was 3.09% for the first quarter of fiscal 2011, compared to 2.94% for the first quarter of fiscal 2010. On January 7, 2011, we entered into a fixed-for-variable interest rate swap on our $500 million 5.600% Senior Notes due 2019. We will incur variable interest under this interest rate swap at a rate equal to three-month LIBOR plus 2.3745%, or approximately 2.65% at the inception of the swap. The entire $1.25 billion of our Senior Notes is now subject to interest rate swaps based on three-month LIBOR. The interest rate swap on the 2019 Notes decreased the weighted-average interest rate incurred on our debt to approximately 1.95% as of January 7, 2011. However, we cannot predict the direction or timing of future changes in interest rates.

Loss on debt refinancing of $8.4 million for the three months ended December 31, 2009, 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 35.0% for the first quarter of fiscal 2011, compared to 38.2% for the first quarter of fiscal 2010. The effective tax rate for the first quarter of fiscal 2011 was unusually low due to $4.9 million of favorable resolutions of state income tax matters and $1.4 million of favorable deferred income tax adjustments resulting from recent state income tax law changes. These items favorably impacted the Company’s earnings for the three months ended December 31, 2010 by approximately $0.01 per share. We expect our effective income tax rate to range from 38% to 39% for the remainder of fiscal 2011. However, 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 the change occurs.

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 quarter of fiscal 2011 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 2011 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. entered into settlement agreements with the Securities and Exchange Commission (“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 TD Ameritrade, Inc. completed the repurchases on March 30, 2010. Through March 30, 2010, TD Ameritrade, 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 December 31, 2010, TD Ameritrade, Inc. held ARS with a fair value of approximately $195 million. During January 2011, we received $58 million of ARS redemptions at par value.

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 our liquid assets metrics to be important measures of our liquidity and of our ability to fund corporate investing and financing activities. Our liquid assets metrics are considered non-GAAP financial measures. We include the excess capital of our broker-dealer and trust company subsidiaries in the calculation of our liquid assets metrics, rather than simply including broker-dealer and trust company cash and cash equivalents, because capital requirements may limit the amount of cash available for dividend from the broker-dealer and trust company subsidiaries to the parent company. Excess capital, as defined below, is generally available for dividend from the broker-dealer and trust company subsidiaries to the parent company. The liquid assets metrics should be considered as supplemental measures of liquidity, rather than as substitutes for cash and cash equivalents.

We define liquid assets — management target as the sum of (a) corporate cash and cash equivalents, (b) corporate short-term investments and (c) regulatory net capital of (i) our clearing broker-dealer subsidiary in excess of 10% of aggregate debit items and (ii) our introducing broker-dealer subsidiaries in excess of a minimum operational target established by management ($50 million in the case of our primary introducing broker-dealer, TD Ameritrade, Inc.). We consider liquid assets — management target to be a measure that reflects our liquidity that would be readily available for corporate investing or financing activities under normal operating circumstances.

We define liquid assets — regulatory threshold 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 consider liquid assets — regulatory threshold to be a measure that reflects our liquidity that would be available for corporate investing or financing activities under unusual operating circumstances.

The following table sets forth a reconciliation of cash and cash equivalents, which is the most directly comparable GAAP measure, to our liquid assets metrics (dollars in thousands):


	Liquid Assets -									Liquid Assets -
	Management Target									Regulatory Threshold
	Dec. 31,			Sept. 30,						Dec. 31,			Sept. 30,
	2010			2010			Change			2010			2010			Change
Cash and cash equivalents	$	893,383		$	741,492		$	151,891		$	893,383		$	741,492		$	151,891
Less: Broker-dealer cash and cash equivalents		(459,728	)		(426,618	)		(33,110	)		(459,728	)		(426,618	)		(33,110	)
Trust company cash and cash equivalents		(60,632	)		(50,937	)		(9,695	)		(60,632	)		(50,937	)		(9,695	)
Investment advisory cash and cash equivalents		(32,178	)		(28,944	)		(3,234	)		(32,178	)		(28,944	)		(3,234	)

Corporate cash and cash equivalents		340,845			234,993			105,852			340,845			234,993			105,852

Plus: Excess trust company Tier 1 capital		—			—			—			12,039			12,284			(245	)
Excess broker-dealer regulatory net capital		419,125			326,368			92,757			940,216			828,979			111,237

Liquid assets	$	759,970		$	561,361		$	198,609		$	1,293,100		$	1,076,256		$	216,844

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


	Liquid Assets
	Management			Regulatory
	Target			Threshold
Liquid assets as of September 30, 2010	$	561,361		$	1,076,256

Plus: Pre-tax income		223,262			223,262
Proceeds from exercise of stock options		718			718
Cash received in sale of business		5,228			5,228
Return of prepayment on structured stock repurchase		118,834			118,834
Other changes in working capital and regulatory net capital		23,816			13,870

Less: Income taxes paid		(54,003	)		(54,003	)
Purchase of property and equipment		(30,225	)		(30,225	)
Purchase of treasury stock		(2,034	)		(2,034	)
Principal payments on capital lease obligations		(1,945	)		(1,945	)
Payment of cash dividends		(28,680	)		(28,680	)
Additional net capital requirement due to increase in aggregate debits		(56,362	)		(28,181	)


Liquid assets as of December 31, 2010	$	759,970		$	1,293,100

Stock Repurchase Programs

On August 5, 2010, our board of directors authorized the repurchase of up to 30 million shares of our common stock. On August 20, 2010, we entered into an agreement with an investment bank counterparty to effect a structured repurchase of up to 12 million shares of our common stock. Under the terms of this agreement, we prepaid $169.2 million to the counterparty. Settlement of the transaction occurred on December 1, 2010 and we purchased approximately 3.2 million shares for approximately $50.4 million ($15.94 per share). The number of shares we purchased from the counterparty and the purchase price were based on the average of the daily volume-weighted average share price of our common stock over the measurement period for the transaction, less a pre-determined discount. Upon settlement of this transaction, the excess prepayment amount of $118.8 million was returned to us in cash. As of December 31, 2010, we had approximately 26.8 million shares remaining on the stock repurchase authorization.

Cash Dividends

Our board of directors declared a $0.05 per share quarterly cash dividend on our common stock during each of the first and second quarters of fiscal 2011. On December 15, 2010 we paid $28.7 million to fund the first quarter dividend and we expect to pay approximately $29 million on February 15, 2011 to fund the second quarter dividend.

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: “Guarantees” under Note 7 — COMMITMENTS AND CONTINGENCIES and “Insured Deposit Account Agreement” under Note 12 — RELATED PARTY TRANSACTIONS. The IDA agreement accounts for a significant percentage of our revenues (27% of our net revenues for the quarter ended December 31, 2010) and enables our clients to invest in an FDIC-insured deposit product without the need for the Company to maintain a bank charter.


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.

Market-related 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 agreements related to the interest rate swaps require 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 arrangement. 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.

The simulations assume 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 results of the simulations based on our financial position as of December 31, 2010 indicate 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, while a gradual 1% (100 basis points) decrease in interest rates over a 12-month period would result in approximately $29 million lower pre-tax income. The results of the simulations reflect the fact that short-term interest rates remain at historically low levels, including the federal funds target rate, which is currently a range of zero to 0.25%.

Market Risk on Auction Rate Securities

As of December 31, 2010, we held ARS with a fair value of $195 million. A hypothetical 10% decrease in the fair value of our ARS would reduce our pre-tax income by approximately $19 million.

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 December 31, 2010. Management, including the Chief Executive

Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of December 31, 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

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. TD Ameritrade, Inc. is 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 motions are pending.


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, 2010, 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, 2010.

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
October 1, 2010 — October 31, 2010		118,537	$	16.73		—		30,000,000
November 1, 2010 — November 30, 2010		2,901	$	17.15		—		30,000,000
December 1, 2010 — December 31, 2010		3,159,409	$	15.94		3,159,360		26,840,640

Total — Three months ended December 31, 2010		3,280,847	$	15.97		3,159,360		26,840,640

On August 5, 2010, our board of directors authorized the repurchase of up to 30 million shares of our common stock. We disclosed this authorization on August 9, 2010 in our quarterly report on Form 10-Q. On August 20, 2010, we entered into an

agreement with an investment bank counterparty to effect a structured repurchase of up to 12 million shares of our common stock. The shares were to be repurchased as part of the 30 million share repurchase authorization. Under the terms of this agreement, we prepaid approximately $169 million to the counterparty. Settlement of the transaction occurred on December 1, 2010 and we purchased approximately 3.2 million shares for approximately $50.4 million ($15.94 per share). The number of shares we purchased from the counterparty and the purchase price were based on the average of the daily volume-weighted average share price of our common stock over the measurement period for the transaction, less a pre-determined discount. Upon settlement of this transaction, the excess prepayment amount of $118.8 million was returned to us in cash. This program was the only stock repurchase program in effect and no programs expired during the first quarter of fiscal 2011.

During the quarter ended December 31, 2010, 121,487 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)

10.1		Form of Restricted Stock Unit Agreement for Employees

10.2		Form of Restricted Stock Unit Agreement for Non-employee Directors

14		Code of Ethics

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: February 4, 2011


	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)

Exhibit 10.1

TD AMERITRADE HOLDING CORPORATION

RESTRICTED STOCK UNIT AGREEMENT

TD AMERITRADE Holding Corporation (the “Company”) hereby grants you, [______________] (the “Grantee”), the number of Restricted Stock Units indicated below under the Company’s 1996 Long-Term Incentive Plan (the “Plan”). Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Restricted Stock Unit Agreement (the “Agreement”) and each Appendix. Subject to the provisions of Appendix A and B (attached) and of the Plan, the principal terms of this grant are as follows:


Grant Date:		[Date]

Total Number of Restricted Stock Units:		[Number]
		This reflects the total number of Restricted Stock Units granted to you on the Grant Date, and shall be increased as of any date by the cumulative number of additional Restricted Stock Units, if any, credited by this Agreement through such date in payment of Dividend Equivalent Rights as described in paragraph 30 of Appendix A (attached) to this Agreement. *

Scheduled Vesting:		The Restricted Stock Units will vest in accordance with the schedule set forth in Appendix A and B (attached) and provisions of the Plan and this Agreement.

Settlement Date:		One Share will be issued for each Restricted Stock Unit that has vested on the Vesting Date specified in Appendix A and B (or on a date as soon as practicable, and no more than ten business days, thereafter).

Acceptance:		You must accept this grant of Restricted Stock Units prior to the Acceptance Deadline, which is sixty (60) days from the Grant Date.


*		Except as otherwise provided in this Agreement, or by the terms of the Plan, you will not vest in the Restricted Stock Units unless you remain employed by the Company or one of its Related Entities through the applicable Vesting Date.

Your signature below indicates your agreement and understanding that this grant is subject to all of the terms and conditions contained in the Plan and this Agreement, including Appendix A and Appendix B. Important additional information on vesting, forfeiture and the actual issuance of the Shares in settlement of the Restricted Stock Units covered by this grant are contained in paragraphs 4 through 15 of Appendix A. PLEASE BE SURE TO READ ALL OF APPENDIX A AND APPENDIX B, WHICH CONTAIN THE SPECIFIC TERMS AND CONDITIONS OF THIS AGREEMENT.

THIS AGREEMENT MUST BE ACCEPTABLE BY YOU BY THE ACCEPTANCE DEADLINE, OR THIS GRANT OF RESTRICTED STOCK UNITS WILL AUTOMATICALLY BE CANCELED.

TD AMERITRADE HOLDING CORPORATION


By:
Title:

ACCEPTED BY THE GRANTEE



Print Name


Signature

Acceptance Date (must be within sixty (60) days of the Grant Date)

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APPENDIX A

TERMS AND CONDITIONS OF RESTRICTED STOCK UNITS

1. Grant . The Company hereby grants to the Grantee under the Plan at the per share price of $.01, equal to the par value of a Share, the number of Restricted Stock Units indicated in the Notice of Grant, subject to all of the terms and conditions in the Agreement, Appendix A and B and the Plan.

2. No Payment of Purchase Price Necessary . When the Restricted Stock Units are settled through the issuance of Shares to the Grantee, the par value of the underlying Company Stock will be deemed paid by the Grantee for each Restricted Stock Unit through the past services rendered by the Grantee, and such deemed payment will be subject to the appropriate tax withholdings.

3. Company’s Obligation to Pay . Each Restricted Stock Unit represents a right to receive, on the Vesting Date, one Share for each vested Restricted Stock Unit. Unless and until the Restricted Stock Units have vested in the manner set forth in this Agreement and Appendix A and B, the Grantee will have no right to receive settlement of Shares underlying such Restricted Stock Units. Prior to the settlement of any vested Restricted Stock Units, such Restricted Stock Units will represent an unsecured obligation. Payment of any vested Restricted Stock Units will be made in Shares.

4. Vesting Schedule . Except as otherwise provided in paragraph 5 of this Appendix A, the Restricted Stock Units awarded by this Agreement are scheduled to vest in accordance with the vesting schedule set forth in Appendix B. Restricted Stock Units scheduled to vest on any applicable date actually will vest only if the Grantee continues to be an Employee through such date.

5. Committee Discretion . The Committee, in its discretion, may accelerate the vesting of the balance, or some lesser portion of the balance, of the Restricted Stock Units at any time, subject to the terms of the Plan. If so accelerated, such Restricted Stock Units will be considered as having vested as of the date specified by the Committee.

7. Forfeiture Upon Ceasing to be an Employee . Other than as provided in paragraphs 9 through 14, and notwithstanding any contrary provision of this Agreement, Appendix A and Appendix B, the balance of the Restricted Stock Units that have not vested pursuant to paragraphs 4 or 5 at the time the Grantee ceases to be an Employee will be forfeited and automatically transferred to and reacquired by the Company at no cost to the Company. The Grantee shall not be entitled to a refund of any price paid for the Restricted Stock Units forfeited to the Company pursuant to this paragraph 7.

8. Forfeiture or Repayment in Connection with Certain Events .

(a) Forfeiture or Repayment . Notwithstanding any contrary provision of this Agreement, Appendix A, Appendix B or the terms of any written agreement between the Company and the Grantee (including specifically any written employment, severance or change in control agreement) if the Committee determines (in its sole discretion, but acting in good faith) that a Clawback Event has occurred at any time while the Grantee is an Employee and such determination is made no later than three (3) years following the Grant Date, then: (i) the balance of the Restricted Stock Units that have not vested as of the date of such event may, in the sole discretion of the Committee, be forfeited and automatically transferred to and reacquired by the Company at no cost to the Company; (ii) any Shares previously issued under this Agreement to the Grantee for vested Restricted Stock Units that have not been sold, transferred or otherwise disposed of by the Grantee may, in the sole discretion of the Committee, be forfeited and automatically transferred to and reacquired by the Company at no cost to the Company; and (iii) if the Shares previously issued under this Agreement to the Grantee for vested Restricted Stock Units have been sold, transferred or otherwise disposed of by the Grantee, the Gain realized by the Grantee (or that would have been realized had the Grantee sold the Shares in an arms-length transaction) will be paid by the Grantee to the Company, if the Committee, in its sole discretion, requires such payment. If, with respect to subsections (ii) and/or (iii) in the preceding sentence, the Grantee refuses to transfer the Shares to the Company and/or make a payment to the Company equal to the Gain, the Company will, if directed by the Committee, in its sole discretion, and subject to applicable law (including any Code Section 409A considerations), recover the value of such Shares and/or Gain and, if applicable, the amount of its court costs, attorneys’ fees and other costs and expenses incurred in connection with enforcing this paragraph 8 by (w) reducing the amount that would otherwise be payable to the Grantee under any compensatory plan, program or arrangement maintained by the Company or any Subsidiary, (x) withholding payment of future increases in compensation (including the payment of any discretionary bonus amount) or grants of compensatory awards that would otherwise have been made in accordance with the Company’s (or a Subsidiary’s) otherwise applicable compensation practices, (y) reducing any severance benefits that would otherwise be payable or provided to the Grantee under any plan, program or arrangement maintained or entered into by the Company or any Subsidiary (including specifically under any employment or severance agreement) or (z) by any combination of the foregoing.

(b) Discretion to Reduce Amount Subject to Forfeiture or Repayment . In the event of a Clawback Event described in paragraph 8(c)(i)(A) below and the Restricted Stock Units were issued to the Grantee as payment (in whole or part) for an award earned under the Company’s Management Incentive Plan (or any other bonus plan of the Company), the Committee may, in its sole discretion, limit the amount to be forfeited by the Grantee and/or recovered from the Grantee to the amount by which the award earned under the applicable bonus plan exceeded the amount that would have been earned had the financial statements been initially filed as restated, as determined by the Committee in accordance with the terms and conditions of the applicable bonus plan. In the event the Committee exercises such discretion, if the award earned under the applicable bonus plan was paid in cash and the Restricted Stock Units, the Committee will have discretion to determine how the amount to be recovered will be allocated among the portion paid in cash and the portion paid in Restricted Stock Units. The amount of Restricted Stock Units, if any, subject to forfeiture or repayment will be covered in the following order: first, unvested Restricted Stock Units that remain

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outstanding; then, Shares previously issued under this Agreement to the Grantee for vested Restricted Stock Units that have not been sold, transferred or otherwise disposed of by the Grantee; and finally, Gain realized (or that would have been realized in an arms-length transaction) by the Grantee from the sale, transfer or disposition of Shares previously issued under this Agreement to the Grantee for vested Restricted Stock Units.

(i) For purposes of this Agreement, Appendix A and Appendix B, a “Clawback Event” shall mean one or more of the following: (A) any of the Company’s financial statements are required to be restated resulting from fraud or willful misconduct by the Grantee or any other person, provided that the Grantee knew or should have known of such fraud or willful misconduct; or (B) any act of fraud, negligence or breach of fiduciary duty by the Grantee or any other person, provided that the Grantee knew or should have known of such fraud, negligence or breach of fiduciary duty, resulting in material loss, damage or injury to the Company.

(ii) For purposes of this Agreement, Appendix A and Appendix B, “Gain” shall mean the Fair Market Value of a Share on the date of sale, transfer or other disposition, multiplied by the number of Shares sold, transferred or otherwise disposed of.

(d) Restrictions on Sale of Stock Pending Determination of Clawback Event . If the Company reasonably believes that a Clawback Event has occurred, the Grantee understands and agrees that the Company may, in its sole discretion, restrict the Grantee’s ability to directly or indirectly sell, offer, contract or grant any option to sell (including without limitation any short sale), pledge, swap, hedge, transfer, or otherwise dispose of any shares of Company common stock held by the Grantee in his or her Company brokerage account (whether issued in connection with this Agreement or otherwise) pending a final determination by the Committee that a Clawback Event has or has not occurred. Such determination shall be made as soon as administratively practicable but in no event will the Grantee be restricted in accordance with the preceding sentence for more than that period of time reasonably necessary for the Committee to determine the existence of a Clawback Event. The Grantee further understands and agrees that that the Company shall have no responsibility or liability for any fluctuations that occur in the price of the Company’s common stock or for any potential loss or gain the Grantee could have realized from the sale of his or her shares of Company common stock during the period of time in which the Grantee is restricted in accordance with this paragraph 8(d).

(e) Change of Control . Notwithstanding any contrary provision of this Agreement, Appendix A or Appendix B, this paragraph 8 will expire and have no further force or effect upon a Change of Control. Solely with respect to this paragraph 8, a “Change of Control” shall not be deemed to have occurred if the Company’s outstanding Shares or substantially all of the Company’s assets are purchased by TD Bank Financial Group.

(f) No Waiver . Any failure by the Company to assert the forfeiture and repayment rights under this paragraph with respect to specific claims against the Grantee shall not waive, or operate to waive, the Company’s right to later assert its rights hereunder with respect to other or subsequent claims against the Grantee.

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(g) No Limitation on Remedies . The Company’s forfeiture and repayment rights under this paragraph shall be in addition to, and not in lieu of, actions the Company may take to remedy or discipline any misconduct by the Grantee including, but not limited to, termination of employment or initiation of appropriate legal action.

(h) Grantee Acknowledgement and Agreement . Without limiting the generality of any other provision herein regarding the Grantee’s understanding of and agreement to the terms and conditions of this Agreement, Appendix A and Appendix B, by signing this Agreement, the Grantee specifically acknowledges that he or she has read and understands this paragraph 8 and agrees to the terms and conditions of this paragraph, including but not limited to the forfeiture and repayment provisions of paragraph 8(a).

9. Death of Grantee . In the event that the Grantee ceases to be an Employee due to his or her death prior to the Vesting Date, the Restricted Stock Units will vest and be settled by the Company through the issuance of Shares to the administrator or executor of the Grantee’s estate, on a date as soon as practicable after the date of the Grantee’s death. The Company may require any administrator or executor of the Grantee’s estate to furnish (a) written notice of his or her status as transferee, or (b) evidence satisfactory to the Company to establish the validity of the transfer and compliance with Applicable Laws pertaining to the transfer of the Shares underlying the Restricted Stock Units.

10. Disability of Grantee . In the event that the Grantee ceases to be an Employee due to his or her Disability prior to the Vesting Date, the Restricted Stock Units will vest and be settled by the Company through the issuance of Shares to the Grantee on a date as soon as practicable after the date of the Grantee’s Disability.

11. Retirement of Grantee . In the event that the Grantee ceases to be an Employee due to his or her Retirement (as defined below) prior to the Vesting Date, the Restricted Stock Units will vest and be settled by the Company through the issuance of Shares to the Grantee on a date as soon as practicable after the date of the Grantee’s Retirement. For the purposes of this Agreement, “Retirement” shall mean a termination of employment for any reason, other than “Cause” (as defined below in paragraph 12), after attaining age fifty-five (55) and after having at least ten (10) years of continuous service with the Company.

12. Termination of Employment without Cause . In the event that the Grantee’s employment is terminated by the Company without “Cause” (as defined below) prior to the Vesting Date, then the actual number of Shares to be issued upon settlement of the Restricted Stock Units, so long as permissible by the terms of the Plan, will be determined as follows: (A) the total number of Restricted Stock Units subject to this award shall be pro-rated based on the number of twelve (12) month periods which have elapsed since the Date of Grant and through the date of the Grantee’s termination of employment, then such pro-rated number of Restricted Stock Units shall (B) vest in accordance with, and pursuant to, paragraph 4. For the purposes of this Agreement, “Cause” shall mean the Grantee’s: (a) failure to substantially perform his or her duties as an Employee, other than due to illness, injury or Disability; (b) willful engaging in conduct which is materially injurious to the Company; (c) misconduct involving serious moral turpitude, or any conviction of, or plea of nolo contendre to, a criminal offense arising out of a breach of trust, embezzlement or fraud committed

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against the Company by the Grantee in the course of the Grantee’s employment with the Company; (d) any violation of paragraph 14 of this Appendix A; or (e) any other action which might be considered “gross misconduct” under the Company’s applicable associate handbook.

13. Termination of Employment following Change of Control . In the event that the Grantee’s employment is terminated by the Company for any reason, other than for Cause (as defined above) within twenty-four (24) months following a Change of Control and prior to the Vesting Date, the Restricted Stock Units will vest and be settled by the Company through the issuance of Shares to the Grantee on a date as soon as practicable after the date of the Grantee’s termination of employment.

14. Non-solicitation and Non-competition . The receipt of any Shares pursuant to this award will be subject to the Grantee, for the period of his or her employment with the Company and for a period the greater of either, twelve months or such period of time set forth in the Grantee’s associate agreement, after the termination of his or her employment with the Company, not: (i) directly or indirectly soliciting customers of the Company in an attempt to have such customers cease their relationship with the Company, (ii) soliciting any employee of the Company for employment with any employer other than the Company, or (iii) directly or indirectly engaging in, having any ownership interest in or participating in any entity that as of the date of termination, competes with the Company in any substantial business of the Company or any business reasonably expected to become a substantial business of the Company. To the extent the Grantee has violated any term and condition of this paragraph 14, the Restricted Stock Units prior to settlement shall be forfeited pursuant to paragraph 7 and if Shares of Company Stock have already been issued to the Grantee, then the Grantee shall be required to either return the Shares or forfeit any gain recognized by the Grantee from the sale of such Shares.

15. Withholding of Taxes . When the Shares are issued in settlement for vested Restricted Stock Units, the Grantee will recognize immediate U.S. taxable income if the Grantee is a U.S. taxpayer. If the Grantee is a non-U.S. taxpayer, the Grantee will be subject to applicable taxes in his or her jurisdiction. The Company (or the employing Related Entity) will withhold a portion of the Shares otherwise issuable in settlement for vested Restricted Stock Units that have an aggregate market value sufficient to pay the minimum federal, state and local income, employment and any other applicable taxes required to be withheld by the Company (or the employing Related Entity) with respect to the Shares. No fractional Shares will be withheld or issued pursuant to the grant of Restricted Stock Units and the issuance of Shares thereunder. By accepting this Award, the Grantee expressly consents to the withholding of Shares as provided for in this paragraph 15. All income and other taxes and withholding related to the Restricted Stock Unit award and any Shares delivered in payment thereof are the sole responsibility of the Grantee.

16. Rights as Stockholder . Except as provided pursuant to the Dividend Equivalent Rights provided in paragraph 30, neither the Grantee nor any person claiming under or through the Grantee shall have any of the rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates representing such Shares (which may be in book entry form) shall have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to the Grantee (including through electronic delivery to a brokerage account) after the Vesting Date. After such issuance, recordation and delivery, the

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Grantee will have all the rights of a stockholder of the Company with respect to voting such Shares and receipt of dividends and distributions on such Shares.

17. No Effect on Employment or Service . The Grantee acknowledges and agrees that this Agreement and Appendix A and B and the transactions contemplated hereunder do not constitute an express or implied promise of continued service or employment as an Employee for any period, or at all, and shall not interfere with the Grantee’s right or the Company’s (or employing Related Entity’s) right to terminate the Grantee’s relationship as an Employee at any time, with or without Cause.

18. Address for Notices . Any notice to be given to the Company under the terms of this Agreement shall be addressed to the Company, in care of its General Counsel, at 6940 Columbia Gateway Drive, Suite 200, Columbia, Maryland 21045, or at such other address as the Company may hereafter designate in writing.

19. Grant is Not Transferable . Except to the limited extent provided in paragraph 9 above, this grant and the rights and privileges conferred hereby shall not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this grant, or of any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment or similar process, this grant and the rights and privileges conferred hereby immediately shall become null and void.

20. Restrictions on Sale of Stock . The Shares issued as settlement for the payment for any vested Restricted Stock Units awarded under this Agreement will be registered under the federal securities laws and will be freely tradable upon receipt. However, the Grantee’s subsequent sale of the Shares will be subject to paragraph 8(d) above, any market blackout-period that may be imposed by the Company and must comply with the Company’s insider trading policies, and any other applicable securities laws. In addition, the Shares issued as settlement for the payment of any vested Restricted Stock Units awarded under this Agreement will also be subject to any applicable ownership guidelines and Share ownership holding periods which may be currently in effect under the Company’s trading policy.

21. Binding Agreement . Subject to the limitation on the transferability of this grant contained herein, this Agreement shall be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

22. Conditions for Issuance of Certificates for Stock . The Shares deliverable to the Grantee may be either previously authorized but unissued Shares or issued Shares which have been reacquired by the Company. The Company shall not be required to issue any certificate or certificates for Shares hereunder prior to fulfillment of all the following conditions: (a) the admission of such Shares to listing on all stock exchanges on which such class of stock is then listed; and (b) the completion of any registration or other qualification of such Shares under any state or federal law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body, which the Committee shall, in its absolute discretion, deem necessary or advisable; and (c) the obtaining of any approval or other clearance from any state or federal governmental agency, which the Committee shall, in its absolute discretion, determine to be

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necessary or advisable; provided that issuance of certificates for Shares hereunder is to be made in no event later than the tenth (10 ^th ) business day following the Vesting Date.

23. Plan Governs . This Agreement and Appendix A and B is subject to all terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Agreement and Appendix A and B and one or more provisions of the Plan, the provisions of the Plan shall govern. Capitalized terms used and not defined in this Agreement and Appendix A and B shall have the meaning set forth in the Plan.

24. Committee Authority . The Committee shall have the power to interpret the Plan and this Agreement and Appendix A and B and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Restricted Stock Units have vested). All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Grantee, the Company and all other persons. The Committee shall not be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Agreement and Appendix A and B.

25. Captions . Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Agreement and Appendix A and B.

26. Agreement Severable . In the event that any provision in this Agreement and Appendix A and B shall be held invalid or unenforceable, such provision shall be severable from, and such invalidity or unenforceability shall not be construed to have any effect on, the remaining provisions of this Agreement and Appendix A and B.

27. Entire Agreement . Other than to the extent any written employment agreement between the Grantee and the Company provides for (a) treatment different or (b) the definition of terms different, than that which is provided by this Agreement and Appendix A and B, this Agreement and Appendix A and B constitutes the entire understanding of the parties on the subjects covered. The Grantee expressly warrants that he or she is not executing this Agreement and Appendix A and B in reliance on any promises, representations, or inducements other than those contained herein.

28. Modifications to the Agreement . The Grantee expressly warrants that he or she is not accepting this Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications to this Agreement or the Plan can be made only in an express written contract executed by a duly authorized officer of the Company.

29. Amendment, Suspension or Termination of the Plan . By accepting this award, the Grantee expressly warrants that he or she has a right to receive Shares under, and subject to the terms and conditions of, the Plan and this Agreement and Appendix A and B, and has received, read and understood the Plan and this Agreement and Appendix A and B. The Grantee understands that the Plan is discretionary in nature and may be modified, suspended or terminated by the Company at any time.

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30. Dividend Equivalent Rights . The Number of Restricted Stock Units subject to this Agreement shall be increased by such additional Restricted Stock Units in an amount determined by the following formula: X = (A x B) / C; where:

	•		“X” is the number of whole Restricted Stock Units to be credited (which shall be rounded down to the next whole Share as no fractional Shares shall be credited pursuant to this Dividend Equivalent Right);

	•		“A” is the amount of cash dividends paid by the Company to stockholders with respect to one Share;

	•		“B” is the number of whole Restricted Stock Units remaining subject to this Agreement as of the cash dividend record date but immediately prior to the application of this paragraph 30; and

	•		“C” is the Fair Market Value of a Share on the cash dividend payment date.

If a Settlement Date occurs before the cash dividend payment date, and the Grantee did not otherwise receive any additional Restricted Stock Units with respect to such Shares issued on the applicable Settlement Date, the Grantee shall nevertheless be entitled to receive additional Restricted Stock Units, in an amount determined pursuant to this paragraph 30, and such additional Restricted Stock Units shall be immediately settled through the issuance of Shares on the cash dividend payment date (or as soon as reasonably practicable thereafter).

Such additional Restricted Stock Units shall be subject to the same terms and conditions and shall be settled in the same manner and at the same time as to which applied to each underlying Share pursuant to which the Dividend Equivalent Rights were paid.

31. Code Section 409A . Notwithstanding anything to the contrary in the Agreement, Appendix A and B and/or the Plan, if the Company reasonably determines that Section 409A of the Code will result in the imposition of additional tax with respect to the settlement of the Shares underlying the Restricted Stock Units on account of the Grantee’s separation from service (as defined in Section 409A of the Code), the Shares (and/or at the election of the Grantee the cash received from the sale of the Shares underlying the vested Restricted Stock Units) will not be paid to the Grantee until the date six (6) months and one (1) day following the date of the Grantee’s separation from service.

32. Notice of Governing Law . This grant of Restricted Stock Units shall be governed by, and construed in accordance with, the laws of the State of Nebraska without regard to principles of conflict of laws.

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APPENDIX B

VESTING SCHEDULE
OF RESTRICTED STOCK UNITS

The vesting of the Restricted Stock Units subject to this award shall be determined based on the following schedule (except as otherwise provided in Appendix A):

The Vesting Date shall be the third (3 ^rd ) anniversary of the Date of Grant. One hundred percent (100%) of the Restricted Stock Units shall become vested on such Vesting Date.

The Settlement Date, when the vested Restricted Stock Units, if any, will be settled by issuing Shares to the Grantee shall be the date, as soon as reasonable practicable following the date the applicable Restricted Stock Units have vested in accordance with the terms of the Plan, the Agreement and this Appendix B, but in no event later than the tenth (10 ^th ) business day following such date.

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Exhibit 10.2

TD AMERITRADE HOLDING CORPORATION

DIRECTOR RESTRICTED STOCK UNIT AGREEMENT

TD AMERITRADE Holding Corporation (the “Company”) hereby grants you, [______________] (the “Grantee”), the number of Restricted Stock Units indicated below under the Company’s 2006 Directors Incentive Plan (the “Plan”). Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Restricted Stock Unit Agreement (the “Agreement”) and each Appendix. Subject to the provisions of Appendix A and B (attached) and of the Plan, the principal terms of this grant are as follows:


Grant Date:		[Date]

Total Number of Restricted Stock Units:		[Number]
		This reflects the total number of Restricted Stock Units granted to you on the Grant Date, and shall be increased as of any date by the cumulative number of additional Restricted Stock Units, if any, credited by this Agreement through such date in payment of Dividend Equivalent Rights as described in paragraph 27 of Appendix A (attached) to this Agreement.*

Scheduled Vesting:		The Restricted Stock Units will vest in accordance with the schedule set forth in Appendix A and B (attached) and provisions of the Plan and this Agreement.

Settlement Date:		One Share will be issued for each Restricted Stock Unit that has vested on the date specified in Appendix B (but in no event later than the tenth (10 ^th ) business day following such Settlement Date).

Acceptance:		You must accept this grant of Restricted Stock Units prior to the Acceptance Deadline, which is sixty (60) days from the Grant Date.


*		Except as otherwise provided in this Agreement, or by the terms of the Plan, you will not vest in the Restricted Stock Units unless you remain a Non-Employee Director of the Company through the applicable Vesting Date.

Your signature below indicates your agreement and understanding that this grant is subject to all of the terms and conditions contained in the Plan and this Agreement, including Appendix A and Appendix B. Important additional information on vesting, forfeiture and the actual issuance of the Shares in settlement of the Restricted Stock Units covered by this grant are contained in paragraphs 4 through 13 of Appendix A. PLEASE BE SURE TO READ ALL OF APPENDIX A AND APPENDIX B, WHICH CONTAIN THE SPECIFIC TERMS AND CONDITIONS OF THIS AGREEMENT.

THIS AGREEMENT MUST BE ACCEPTABLE BY YOU BY THE ACCEPTANCE DEADLINE, OR THIS GRANT OF RESTRICTED STOCK UNITS WILL AUTOMATICALLY BE CANCELED.

TD AMERITRADE HOLDING CORPORATION

By:
Title:

ACCEPTED BY THE GRANTEE



Print Name


Signature

Acceptance Date (must be within sixty (60) days of the Grant Date)

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APPENDIX A

TERMS AND CONDITIONS OF RESTRICTED STOCK UNITS

3. Company’s Obligation to Pay . Each Restricted Stock Unit represents a right to receive, on the Settlement Date, one Share for each vested Restricted Stock Unit. Unless and until the Restricted Stock Units have vested in the manner set forth in this Agreement and Appendix A and B, the Grantee will have no right to receive settlement of Shares underlying such Restricted Stock Units. Prior to the settlement of any vested Restricted Stock Units, such Restricted Stock Units will represent an unsecured obligation. Payment of any vested Restricted Stock Units will be made in Shares.

6. Issuance of Shares after Vesting . Each Restricted Stock Unit that becomes vested under this Agreement will be settled by the Company through the issuance of Shares to the Grantee (or in the event of the Grantee’s death, to his or her estate) as soon as practicable following the Settlement Date, subject to paragraph 12, and in no event later than the tenth (10 ^th ) business day following the Settlement Date. Notwithstanding anything to the contrary in this Agreement, the Company may also authorize, in conjunction with the terms of the Plan or any other applicable Company deferred compensation plan, that the receipt of Stock subject to any Restricted Stock Unit, may be deferred under the terms and conditions of the Plan or any such other Company deferred compensation plan.

7. Forfeiture . Other than as provided in paragraphs 8 through 10, and notwithstanding any contrary provision of this Agreement, Appendix A and Appendix B, the balance of the Restricted Stock Units that have not vested pursuant to paragraphs 4 or 5 at the time the Grantee

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ceases to be a Non-Employee Director will be forfeited and automatically transferred to and reacquired by the Company at no cost to the Company. The Grantee shall not be entitled to a refund of any price paid for the Restricted Stock Units forfeited to the Company pursuant to this paragraph 7.

8. Death of Grantee . In the event that the Grantee ceases to be a Non-Employee Director due to his or her death prior to the Settlement Date, the Restricted Stock Units will vest and be settled by the Company through the issuance of Shares to the administrator or executor of the Grantee’s estate, on a date as soon as practicable after the date of the Grantee’s death. The Company may require any administrator or executor of the Grantee’s estate to furnish (a) written notice of his or her status as transferee, or (b) evidence satisfactory to the Company to establish the validity of the transfer and compliance with Applicable Laws pertaining to the transfer of the Shares underlying the Restricted Stock Units.

9. Disability of Grantee . In the event that the Grantee ceases to be a Non-Employee Director due to his or her Disability prior to the Settlement Date, the Restricted Stock Units will vest and be settled by the Company through the issuance of Shares to the Grantee on a date as soon as practicable after the date of the Grantee’s Disability.

10. Change in Control . In the event that a Change in Control occurs prior to the Settlement Date, the Restricted Stock Units will vest and be settled by the Company through the issuance of Shares on a date as soon as practicable after the effective date of the Change in Control, and in no event later than the tenth (10 ^th ) business day following the effective date of the Change in Control.

11. Non-solicitation and Non-competition . The receipt of any Shares pursuant to this award will be subject to the Grantee, for the period of his or her service as a Non-Employee Director with the Company and for a period of one year after the termination of his or her service with the Company, not: (i) directly or indirectly soliciting customers of the Company in an attempt to have such customers cease their relationship with the Company, (ii) soliciting any employee of the Company for employment with any employer other than the Company, or (iii) directly or indirectly engaging in, having any ownership interest in or participating in any entity that as of the date of termination, competes with the Company in any substantial business of the Company or any business reasonably expected to become a substantial business of the Company. To the extent the Grantee has violated any term and condition of this paragraph 11, the Restricted Stock Units prior to settlement shall be forfeited pursuant to paragraph 7 and if Shares have already been issued to the Grantee, then the Grantee shall be required to either return the Shares or forfeit any gain recognized by the Grantee from the sale of such Shares.

12. Withholding of Taxes . When the Shares are issued in settlement for vested Restricted Stock Units, the Grantee will recognize immediate U.S. taxable income if the Grantee is a U.S. taxpayer. If the Grantee is a non-U.S. taxpayer, the Grantee will be subject to applicable taxes in his or her jurisdiction. If the Company is obligated at the time of the issuance of the Shares to withhold taxes on behalf of such income recognized by the Grantee (for example if the Grantee has become an Employee of the Company after the Grant Date and prior to the Vesting Date or Settlement Date, or if changes in Applicable Laws require such withholding), the Company reserves the right to

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withhold a portion of the Shares otherwise issuable in payment for vested Restricted Stock Units that have an aggregate market value sufficient to pay any applicable minimum federal, state and local income, employment and any other applicable taxes required to be withheld by the Company with respect to the Shares. No fractional Shares will be withheld or issued pursuant to the grant of Restricted Stock Units and the issuance of Shares thereunder. The Company may instead, in its discretion, withhold an amount necessary to pay the applicable taxes from the Grantee’s Non-Employee Director compensation or other amounts payable to the Grantee, with no withholding of Shares. In the event that any applicable withholding requirements are not satisfied through the withholding of Shares (or, through the Grantee’s compensation or other amounts payable to the Grantee, as indicated above), no Shares will be issued to the Grantee (or his or her estate) in settlement of the Restricted Stock Units unless and until satisfactory arrangements (as determined by the Committee) have been made by the Grantee with respect to the payment of any applicable taxes which the Company determines must be withheld or collected with respect to such Restricted Stock Units. By accepting this Award, the Grantee expressly consents to the withholding of Shares and to any cash or Share withholding as provided for in this paragraph 12. All income and other taxes related to the Restricted Stock Unit award and any Shares delivered in payment thereof are the sole responsibility of the Grantee.

13. Rights as Stockholder . Except as provided pursuant to the Dividend Equivalent Rights provided in paragraph 27, neither the Grantee nor any person claiming under or through the Grantee shall have any of the rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates representing such Shares (which may be in book entry form) shall have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to the Grantee (including through electronic delivery to a brokerage account) after the Settlement Date. After such issuance, recordation and delivery, the Grantee will have all the rights of a stockholder of the Company with respect to voting such Shares and receipt of dividends and distributions on such Shares.

14. No Effect on Service . The Grantee acknowledges and agrees that this Agreement and Appendix A and B and the transactions contemplated hereunder do not constitute an express or implied promise of continued service for any period, or at all, and shall not interfere with the Grantee’s right or the Company’s right to terminate the Grantee’s relationship at any time, with or without cause.

15. Address for Notices . Any notice to be given to the Company under the terms of this Agreement shall be addressed to the Company, in care of its General Counsel, at 6940 Columbia Gateway Drive, Suite 200, Columbia, Maryland 21045, or at such other address as the Company may hereafter designate in writing.

16. Grant is Not Transferable . Except to the limited extent provided in paragraph 8 above, this grant and the rights and privileges conferred hereby shall not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this grant, or of any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment or similar process, this grant and the rights and privileges conferred hereby immediately shall become null and void.

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17. Restrictions on Sale of Stock . The Shares issued as settlement for the payment for any vested Restricted Stock Units awarded under this Agreement will be registered under the federal securities laws and will be freely tradable upon receipt. However, the Grantee’s subsequent sale of the Shares will be subject to any market blackout-period that may be imposed by the Company and must comply with the Company’s insider trading policies, and any other applicable securities laws. In addition, the Shares issued as settlement for the payment of any vested Restricted Stock Units awarded under this Agreement will also be subject to any applicable ownership guidelines and Share ownership holding periods which may be currently in effect under the Company’s trading policy.

18. Binding Agreement . Subject to the limitation on the transferability of this grant contained herein, this Agreement shall be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

19. Conditions for Issuance of Certificates for Stock . The Shares deliverable to the Grantee may be either previously authorized but unissued Shares or issued Shares which have been reacquired by the Company. The Company shall not be required to issue any certificate or certificates for Shares hereunder prior to fulfillment of all the following conditions: (a) the admission of such Shares to listing on all stock exchanges on which such class of stock is then listed; and (b) the completion of any registration or other qualification of such Shares under any state or federal law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body, which the Committee shall, in its absolute discretion, deem necessary or advisable; and (c) the obtaining of any approval or other clearance from any state or federal governmental agency, which the Committee shall, in its absolute discretion, determine to be necessary or advisable; provided that issuance of certificates for Shares hereunder is to be made in no event later than the tenth (10 ^th ) business day following the Settlement Date.

20. Plan Governs . This Agreement and Appendix A and B is subject to all terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Agreement and Appendix A and B and one or more provisions of the Plan, the provisions of the Plan shall govern. Capitalized terms used and not defined in this Agreement and Appendix A and B shall have the meaning set forth in the Plan.

21. Committee Authority . The Committee shall have the power to interpret the Plan and this Agreement and Appendix A and B and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Restricted Stock Units have vested). All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Grantee, the Company and all other persons. The Committee shall not be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Agreement and Appendix A and B.

22. Captions . Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Agreement and Appendix A and B.

23. Agreement Severable . In the event that any provision in this Agreement and Appendix A and B shall be held invalid or unenforceable, such provision shall be severable from,

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and such invalidity or unenforceability shall not be construed to have any effect on, the remaining provisions of this Agreement and Appendix A and B.

24. Entire Agreement . This Agreement constitutes the entire understanding of the parties on the subjects covered. The Grantee expressly warrants that he or she is not executing this Agreement and Appendix A and B in reliance on any promises, representations, or inducements other than those contained herein.

25. Modifications to the Agreement . The Grantee expressly warrants that he or she is not accepting this Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications to this Agreement or the Plan can be made only in an express written contract executed by a duly authorized officer of the Company.

26. Amendment, Suspension or Termination of the Plan . By accepting this award, the Grantee expressly warrants that he or she has a right to receive Shares under, and subject to the terms and conditions of, the Plan and this Agreement and Appendix A and B, and has received, read and understood the Plan and this Agreement and Appendix A and B. The Grantee understands that the Plan is discretionary in nature and may be modified, suspended or terminated by the Company at any time.

27. Dividend Equivalent Rights . The Number of Restricted Stock Units subject to this Agreement shall be increased by such additional Restricted Stock Units in an amount determined by the following formula: X = (A x B) / C; where:

	•		“X” is the number of whole Restricted Stock Units to be credited (which shall be rounded down to the next whole Share as no fractional Shares shall be credited pursuant to this Dividend Equivalent Right);

	•		“A” is the amount of cash dividends paid by the Company to stockholders with respect to one Share;

	•		“B” is the number of whole Restricted Stock Units remaining subject to this Agreement as of the cash dividend record date but immediately prior to the application of this paragraph 27; and

	•		“C” is the Fair Market Value of a Share on the cash dividend payment date.

If a Settlement Date occurs before the cash dividend payment date, and the Grantee did not otherwise receive any additional Restricted Stock Units with respect to such Shares issued on the applicable Settlement Date, the Grantee shall nevertheless be entitled to receive additional Restricted Stock Units, in an amount determined pursuant to this paragraph 27, and such additional Restricted Stock Units shall be immediately settled through the issuance of Shares on the cash dividend payment date (or as soon as reasonably practicable thereafter).

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28. Notice of Governing Law . This grant of Restricted Stock Units shall be governed by, and construed in accordance with, the laws of the State of Nebraska without regard to principles of conflict of laws.

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APPENDIX B

VESTING SCHEDULE
OF RESTRICTED STOCK UNITS

The vesting of the Restricted Stock Units subject to this award shall be determined based on the following schedule:

•

One hundred percent (100%) of the Restricted Stock Units shall vest on the first anniversary of the Grant Date.

The Settlement Date, when the vested Restricted Stock Units, if any, will be settled by issuing Shares of Company Stock to the Grantee shall be either: (1) the Settlement Date selected by the Grantee pursuant to Section 6 of this Agreement; or (2) if no Settlement Date has been selected by the Grantee, then the Settlement Date shall be the first date as soon as reasonably practicable following the date upon which such Restricted Stock Units have vested.

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Exhibit 14

TD AMERITRADE HOLDING CORPORATION

Code of Business Conduct and Ethics

Index:

	I.		Purpose and Background

	II.		Applicability

	III.		Standards of Business Conduct and Ethics

	A.		Honest and Ethical Conduct

	B.		Full, Fair, Accurate, Timely and Understandable Public Disclosure

	C.		Full, Accurate and Timely Regulatory Reporting

	D.		Compliance with Laws, Rules and Regulations

	E.		Waiver

	F.		Disclosure of Waiver and Amendment

IV.

Additional Standards and Policies

	A.		Trading of Securities

	B.		Protection of Intellectual Property

	C.		Protection of Confidential Information

	D.		Corporate Opportunity

	E.		Fair Dealing

	F.		Equal Employment Opportunity and Harassment

	G.		Protection and Use of Company Assets

	H.		Record Keeping

	I.		Waiver

Reporting Violations

	A.		Reporting Violations of the Code

	B.		Anonymous Reporting of Violations

	C.		Anti-Retaliation

VI.

Compliance and Accountability

Appendix of Defined Terms

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TD AMERITRADE HOLDING CORPORATION

Code of Business Conduct and Ethics

I. Purpose and Background

This Code of Business Conduct and Ethics (this “Code”) is designed (a) to promote (i) honest and ethical conduct, (ii) full, fair, accurate, timely and understandable disclosure in the reports and documents TD Ameritrade Holding Corporation (“TD Ameritrade”) files with or submits to the Securities and Exchange Commission (the “SEC”) and in other public communications made by TD Ameritrade (collectively, the “Public Disclosures”), and (iii) compliance with applicable laws, rules and regulations, (b) to deter wrongdoing, and (c) to help foster an atmosphere of ethical and prudent conduct throughout the Company. This Code outlines the broad principles of legal and ethical business conduct embraced by TD Ameritrade and its subsidiaries (collectively, the “Company”). It is not a complete list of legal or ethical standards applicable to members of the Board of Directors, officers or associates (i.e., employees) of the Company.

In addition to this Code, the Company has adopted policies addressing specific issues, including, but not limited to, those expressed or referenced in the Associate Handbook, the Trading Policy, the Global Information Protection Program, and the Delegation of Authority Policy, some of which are cross-referenced in this Code. These policies are not part of this Code but they are important and you are required to familiarize yourself and comply with all the Company’s policies.

II. Applicability

This Code applies to the members of the Board of Directors, the officers and the associates of the Company (collectively referred to in this Code as the “Covered Persons”). Sections I-III, V and VI of this Code constitute the Company’s Code of Ethics for the purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules promulgated by the SEC thereunder and the Company’s Code of Conduct for the purposes of Nasdaq Market Rule 5610.

The Code should be provided to and generally followed by the Company’s agents and representatives, including contract or temporary personnel and outside consultants.

III. Standards of Business Conduct and Ethics

A. Honest and Ethical Conduct

In performing his or her duties, each of the Covered Persons shall act in accordance with high standards of honest and ethical conduct including taking appropriate actions to permit and facilitate the ethical handling and resolution of actual or apparent conflicts of interest between personal and professional relationships. These standards do not prohibit any action that is permitted by TD Ameritrade’s Certificate of Incorporation.

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B. Full, Fair, Accurate, Timely and Understandable Public Disclosure

In performing his or her duties, each of the Covered Persons who is responsible for or otherwise involved in the process of preparation or review of TD Ameritrade’s Public Disclosures shall take appropriate action within his or her areas of responsibility to cause the Company’s public disclosures to be full, fair, accurate, timely, and understandable.

Each of the Covered Persons who is responsible for recording or providing financial or other information or who is otherwise called upon to provide information in connection with the Public Disclosure process shall take appropriate and prompt action to provide full and accurate information to those Covered Persons who are responsible for or otherwise involved in the process of preparation or review of the Company’s Public Disclosures.

In performing his or her duties, each of the Covered Persons who is responsible for or otherwise involved in the process of preparation or review of the Company’s Public Disclosures, within his or her areas of responsibility and in accordance with the Public Disclosure process, shall provide full and accurate financial and other information to, and engage in open and honest discussions with: (a) the Company’s Board of Directors, Audit Committee, Chief Executive Officer, Chief Financial Officer and Corporate Audit department in connection with the Public Disclosure process and (b) the Company’s outside auditors in connection with their audits and reviews of the Company’s financial statements and reports and documents filed with or submitted to the SEC and the Company’s internal control over financial reporting.

C. Full, Accurate, and Timely Regulatory Reporting

In performing his or her duties, each of the Covered Persons who is responsible for or otherwise involved in the process of preparation or review of the Company’s Regulatory Reporting shall take appropriate action within his or her areas of responsibility to cause the Company’s Regulatory Reporting to be full, accurate, and timely. “Regulatory Reporting” means the reporting or disclosing of all information required to be filed, submitted or disclosed by the Company’s broker/dealer or investment advisor subsidiaries with or to the SEC, state regulatory agencies, the FINRA, or other regulatory authorities.

Each of the Covered Persons who is responsible for recording or providing financial or other information or who is otherwise called upon to provide information in connection with the Regulatory Reporting process shall take appropriate and prompt action to provide full and accurate information to those Covered Persons who are responsible for or otherwise involved in the process of preparation or review of the Company’s Regulatory Reporting.

In performing his or her duties, each of the Covered Persons who is responsible for or otherwise involved in the process of preparation or review of the Company’s Regulatory Reporting, within his or her areas of responsibility and in accordance with the Regulatory Reporting process, shall provide full and accurate financial and other information to, and engage in open and honest discussions with: (a) the Company’s Board of Directors, Audit Committee, Chief Executive Officer, Chief Financial Officer and Corporate Audit department in connection

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with the Regulatory Reporting process and (b) the Company’s outside auditors in connection with their audits and reviews of the Company’s Regulatory Reporting.

D. Compliance with Laws, Rules and Regulations

In performing his or her duties, each of the Covered Persons shall comply, and take appropriate action within his or her areas of responsibility to cause the Company to comply, with applicable governmental laws, rules, and regulations and applicable rules and regulations of self-regulatory organizations.

E. Waiver

TD Ameritrade’s Board of Directors has the authority to approve a waiver from any provision of this Section III of the Code for TD Ameritrade’s directors or executive officers. The Company’s General Counsel, the Chief Operating Officer and the Audit Committee each has the authority to approve a waiver from any provision of this Section III of the Code for all other Covered Persons and Company agents and representatives. Each of the Company’s General Counsel and the Chief Operating Officer will report promptly to the Chief Executive Officer, the Chief Financial Officer or the Audit Committee any waiver he or she approves from any provision of this Section III of the Code.

F. Disclosure of Waiver and Amendment

TD Ameritrade will publicly disclose information concerning any waiver or an implicit waiver of this Section III of the Code for any of TD Ameritrade’s directors, executive officers, principal executive officer, principal financial officer and the principal accounting officer or controller or persons performing similar functions, as required by applicable law, rule or regulation. A waiver means the approval of a material departure from a provision of this Section III of the Code. TD Ameritrade will publicly disclose any amendment of this Section III of the Code as required by applicable law or regulation.

IV. Additional Standards and Policies

A. Trading of Securities

Covered Persons must not buy or sell securities on the basis of material nonpublic information relating to the Company or any other issuer of securities or communicate material, non-public information to another person who buys or sells securities on the basis of the information. Covered Persons should refer to the Company’s Trading Policy.

B. Protection of Intellectual Property

It is the Company’s policy to protect the intellectual property developed, licensed or otherwise owned by the Company. Covered Persons should refer to the Company’s Intellectual Property Protection Policy.

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C. Protection of Confidential Information

It is the Company’s policy to protect the following information from unauthorized disclosure or use:

	•		Confidential information about the Company and its clients, including business, financial, technical, research and development, personnel and personal information; and

	•		Any information that the Company obtains from another company or person in confidence under a nondisclosure agreement.

Company policy also involves taking reasonable measures to establish proprietary rights to trade secrets and to avoid infringement of others’ intellectual property rights. Covered Persons should refer to the Company’s Confidential Information Protection Policy.

D. Corporate Opportunity

Each of the Covered Persons owes a duty to the Company to advance its legitimate interests when the opportunity to do so arises. Except as expressly permitted by TD Ameritrade’s Certificate of Incorporation, a Covered Person, may not compete against the Company or take for himself or herself, or direct to a third party an opportunity that would be an appropriate opportunity for the Company that is discovered in the course of such person’s service to or employment by the Company or through the use of the Company’s property or information, unless the Company has already been offered the opportunity and turned it down.

E. Fair Dealing

It is the Company’s policy to engage in honest business competition. It does not seek competitive advantages through illegal or unethical business practices. In furtherance of this policy, each of the Covered Persons should deal fairly with all other Covered Persons and the clients, service providers, and suppliers of the Company.

No Covered Person should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentations of material facts, or any unfair dealing practice.

Fair dealing requires that the Company deal with competitors at arm’s length. For example, agreements to restrain trade by setting prices with competitors violate antitrust laws designed to encourage competition. Fair dealing also requires that Covered Persons not make illegal payments—which could include gifts, favors, entertainment and cash—to government officials. Each of the Covered Persons must comply with the Foreign Corrupt Practices Act, which generally prohibits giving anything of value, directly or indirectly, to foreign government officials or political candidates in order to obtain or retain business. The purpose of business entertainment and gifts in a commercial setting is to create good will and sound working relationships, not to gain unfair advantage with customers. Covered Persons should refer to the

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Company’s Gifts and Gratuities Policy in the Associate Handbook.

F. Equal Employment Opportunity and Harassment

It is the Company’s policy to provide equal employment opportunities in all aspects of employment and the Company prohibits discrimination of any kind. The Company expects each of the Covered Persons to act in a manner consistent with its equal employment opportunity policy.

The Company is committed to a work environment which fosters teamwork and cooperation and in which all individuals are treated with respect and dignity. Accordingly, it is the continuing policy of the Company to ensure that harassment will not be tolerated. This includes associates, applicants for employment, temporary workers, contractors, vendors, service providers, clients or others with whom associates may interact in the workplace.

Covered Persons should refer to the Associate Handbook, which provides additional information regarding the Company’s equal employment opportunity, harassment, and other policies.

G. Protection and Use of Company Assets

Each of the Covered Persons should protect the assets of the Company, including records and confidential information, and ensure their efficient use. All assets of the Company should be used for legitimate business purposes only. In addition, Covered Persons should refer to the Delegation of Authority Policy, which provides controls relating to the approval of transactions, expenditures and other disposition of assets.

H. Record Keeping

The Company requires honest and accurate recording and reporting of information in order to make responsible business decisions and to comply with applicable laws and regulations. All of the Company’s books, records, accounts and financial statements must be maintained in reasonable detail, must accurately reflect the Company’s transactions and must conform both to applicable legal requirements and to the Company’s system of internal controls.

It is the Company’s policy to retain all records and documents necessary for the conduct of its business and as required by applicable laws, rules and regulations. Records and documents should be retained according to the Company’s record retention policies. Records and documents should not be destroyed or discarded if they are the subject of an investigation (whether internal or by a governmental authority or self-regulatory organization) or a judicial, regulatory, administrative or other proceeding, including, but not limited to, records or documents that are requested in a subpoena or other information request in an investigation or proceeding. Questions regarding record and document retention in such situations should be addressed to the Company’s General Counsel or Senior Records Manager.

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I. Waiver

The Company’s General Counsel, the Chief Operating Officer and the Audit Committee each has the authority to approve a waiver from any provision of this Section IV of the Code for all Covered Persons and Company agents and representatives. Each of the Company’s General Counsel and the Chief Operating Officer will report promptly to the Chief Executive Officer, the Chief Financial Officer or the Audit Committee any waiver he or she approves from any provision of this Section IV of the Code.

V. Reporting Violations

A. Reporting Violations of the Code

Each of the Covered Persons shall promptly provide the Company’s General Counsel or the Company’s Audit Committee with information concerning conduct such Covered Person reasonably believes to constitute a violation of this Code or a material violation by the Company or its directors, officers or associates, of the securities laws, rules or regulations and other laws, rules or regulations applicable to the Company. Alternatively, Covered Persons may provide such information anonymously in accordance with subsection B below.

Any Covered Person having a concern or complaint regarding questionable accounting or auditing matters of the Company is encouraged to speak with his or her manager or submit the concern or complaint to the Company’s Managing Director of Corporate Audit or General Counsel, who will then transmit it to the Audit Committee. Such concerns or complaints may be submitted anonymously in accordance with subsection B below, in which case they will be treated as confidential subject to applicable law, rules and regulations.

B. Anonymous Reporting of Violations

Any violation of this Code and any violation by the Company or a Covered Person of the securities laws, rules or regulations, other laws, rules or regulations applicable to the Company or concerns or complaints regarding questionable accounting or auditing matters of the Company may be reported anonymously via the Company’s hotline provider, The Network, by calling 1-877-888-0002.

C. Anti-Retaliation

Covered Persons are encouraged to talk to supervisors, managers or other appropriate personnel about observed possible violations of this Code or laws, rules, or regulations. It is the policy of the Company not to permit retaliation for good faith reports of misconduct by others and to promptly investigate reports received. The Company strives to ensure that all of its associates can work in an environment free from retaliation. Retaliation against an individual for reporting violations or participating in investigations relating to perceived violations of Company policies or this Code, or laws, rules or regulations is a violation of this Code and will subject the offender to disciplinary action, up to and including termination. False and malicious complaints of retaliation may be the subject of appropriate disciplinary action as well. This does not include any complaints made in good faith, even if it is determined that unlawful retaliation did not occur.

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Covered Persons who believe that they have been the victims of unlawful retaliation resulting from their lawful act of providing information to, or assisting an investigation performed by, the Company or any regulatory or government agency should immediately report their concerns to the Company’s Human Resource Department or anonymously as provided in subsection B above. Any reported allegations of retaliation will be investigated promptly. The investigation may include individual interviews with the persons involved and, where necessary, with individuals who may have observed the alleged conduct or may have other relevant knowledge. Each of the Covered Persons is expected to cooperate in connection with the investigation. Confidentiality will be maintained throughout the investigatory process to the extent consistent with the need to conduct an adequate investigation and, where appropriate, take corrective action.

VI. Compliance and Accountability

With respect to TD Ameritrade’s directors and executive officers, the Audit Committee will assess compliance with this Code, report violations of this Code to the Board of Directors, and, based upon the relevant facts and circumstances, recommend to the Board of Directors appropriate action.

With respect to all other associates, agents and representatives of the Company, the Company’s General Counsel and the Chief Operating Officer each has the authority to assess compliance with this Code, report violations of this Code to the Audit Committee to the extent either determines appropriate, and, based upon the relevant facts and circumstances, determine appropriate action or recommend to the Audit Committee appropriate action.

A violation of this Code may result in disciplinary action, up to and including termination of employment.

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Code of Business Conduct and Ethics

Appendix of Defined Terms

The terms below are defined in the sections indicated:

“TD Ameritrade”: Section I

“Code”: Section I

“Company”: Section I

“Covered Persons”: Section II

“Public Disclosures”: Section I

“Regulatory Reporting”: Section III.C

“SEC”: Section I

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Exhibit 15.1

Awareness Letter of Independent Registered Public Accounting Firm

The Board of Directors
TD Ameritrade Holding Corporation

We are aware of the incorporation by reference in the following Registration Statements of TD Ameritrade Holding Corporation:

(1)		Registration Statement (Form S-8 No. 333-132016)

(2)		Registration Statement (Form S-8 No. 333-105336)

(3)		Registration Statement (Form S-8 No. 333-99481)

(4)		Registration Statement (Form S-8 No. 333-99353)

(5)		Registration Statement (Form S-8 No. 333-86164)

(6)		Registration Statement (Form S-8 No. 333-77573) pertaining to the Associates’ 401(k) Profit Sharing Plan and Trust

(7)		Registration Statement (Form S-8 No. 333-160073)

(8)		Registration Statement (Form S-3 No. 333-87999)

(9)		Registration Statement (Form S-3 No. 333-163211)

(10)		Post Effective Amendment No. 1 to Registration Statement Number 333-88632 on Form S-3 to Form S-4

of our report dated February 4, 2011 relating to the unaudited condensed consolidated interim financial statements of TD Ameritrade Holding Corporation that are included in its Form 10-Q for the quarter ended December 31, 2010.



	/s/ ERNST & YOUNG LLP

Minneapolis, Minnesota
February 4, 2011

EXHIBIT 31.1

CERTIFICATION

I, Fredric J. Tomczyk, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of TD Ameritrade Holding Corporation;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

			(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

			(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

			(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

			(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

			(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

			(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 4, 2011



	/s/ FREDRIC J. TOMCZYK
	Fredric J. Tomczyk
	President and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION

I, William J. Gerber, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of TD Ameritrade Holding Corporation;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

		(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

		(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

		(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

		(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.		The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

		(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

		(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 4, 2011



	/s/ WILLIAM J. GERBER
	William J. Gerber
	Executive Vice President, Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned hereby certify that the Quarterly Report on Form 10-Q for the quarter ended December 31, 2010 filed by TD Ameritrade Holding Corporation with the Securities and Exchange Commission fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the report fairly presents, in all material respects, the financial condition and results of operations of TD Ameritrade Holding Corporation.



Dated: February 4, 2011	/s/ FREDRIC J. TOMCZYK
	Fredric J. Tomczyk
	President and Chief Executive Officer


Dated: February 4, 2011	/s/ WILLIAM J. GERBER
	William J. Gerber
	Executive Vice President, Chief Financial Officer

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