TD Ameritrade 2018 Annual Report

9 • Preparing client trade confirmations and statements; • Performing designated cashiering functions, including the delivery and receipt of funds and securities to or from the client; • Possession, control and safeguarding of funds and securities in client accounts; • Processing cash sweep transactions to and from bank deposit accounts and money market mutual funds; • Transmitting tax accounting information to the client and to the applicable tax authority; and • Forwarding prospectuses, proxy materials and other shareholder information to clients. We contract with external providers for futures clearing. We also contract with an external provider to facilitate foreign exchange trading for our clients. Competition We believe that the principal determinants of success in the retail brokerage market are brand recognition, size of client base and client assets, ability to attract new clients and client assets, client trading activity, efficiency of operations, technology infrastructure and advancements and access to financial resources. We also believe that the principal factors considered by clients in choosing a brokerage firm are reputation, client service quality, price, convenience, product offerings, quality of trade execution, platformcapabilities, innovation and overall value. Based on our experience, focus group research and the success we have enjoyed to date, we believe that we presently compete successfully in each of these categories. The market for brokerage services, particularly electronic brokerage services, continues to evolve and is highly competitive. We experience significant competition and expect this competitive environment to continue. We encounter direct competition from numerous other brokerage firms, many of which provide online brokerage services. These competitors include E*TRADE Financial Corporation, The Charles Schwab Corporation and Fidelity Investments. We also encounter competition from the broker-dealer affiliates of established full-commission brokerage firms, such as Merrill Lynch and Morgan Stanley, as well as from banks, mutual fund sponsors, online wealthmanagement services (including so-called "robo-advisors") and other financial institutions and organizations, some of which provide online brokerage services. Regulation The securities, futures and foreign exchange industries are subject to extensive regulation under federal and state law. Our broker-dealers, TD Ameritrade, Inc. and TDAC, are required to register with the U.S. Securities and Exchange Commission ("SEC") and to be members of FINRA and the Municipal Securities Rulemaking Board ("MSRB"). Our futures commission merchant ("FCM") and forex dealer member ("FDM") subsidiary, TD Ameritrade Futures & Forex LLC ("TDAFF"), is registered with the Commodity Futures Trading Commission ("CFTC") and is a member of, and the corresponding services functions are regulated by, the NFA. Our broker- dealer subsidiaries are subject to the requirements of the Securities Exchange Act of 1934 (the "Exchange Act") relating to broker-dealers, including, among other things, minimum net capital requirements under the SECUniform Net Capital Rule (Rule 15c3-1), best execution requirements for client trades under SEC guidelines and FINRA rules and segregation of client funds under the SEC Customer Protection Rule (Rule 15c3-3), administered by the SEC and FINRA. TDAFF is subject to regulations under the Commodity Exchange Act, administered by the CFTC and NFA, including CFTC Regulations 1.17 and 5.7, which require the maintenance of minimum adjusted net capital, and CFTC Regulation 1.20, which requires segregation of client funds. Net capital rules are designed to protect clients, counterparties and creditors by requiring a broker-dealer, an FCM or an FDM to have sufficient liquid resources available to satisfy its financial obligations. Net capital is a measure of a broker-dealer's, an FCM's or an FDM's readily available liquid assets, reduced by its total liabilities other than approved subordinated debt. Under the Uniform Net Capital Rule, a broker-dealer may not repay any subordinated borrowings, pay cash dividends or make any unsecured advances or loans to its parent company or employees if such payment would result in a net capital amount below required levels. Broker-dealers are required to provide notice to the SEC and FINRA if their net capital is below certain required levels. Likewise, a FCM and FDM, such as TDAFF, must provide notice to the CFTC if its adjusted net capital amounts are below required levels.