Good day, everyone, and welcome to the TD Ameritrade Holding Corporation fourth quarter and fiscal year-end 2008 earnings results conference call. Today’s conference is being recorded. With us today from the company is Chairman of the Board, Joe Moglia; and President and Chief Financial Officer, Fred Tomczyk; and Chief Financial Officer, Bill Gerber. At this time, I would like to turn the conference over to Mr. Bill Murray, Managing Director of Investor Relations, Communications, and Public Affairs. Please go ahead, sir.

Thank you. Good morning, everyone and welcome to the TD Ameritrade fiscal year ’08 and September quarter earnings call. We have released our earnings earlier this morning. Hopefully you have had a chance to look at it. A copy of our press release in today’s presentation is on our website, if you need to go grab it. Before we begin, I would like to note that this call contains forward-looking statements that are made pursuant to the Safe Harbor provisions of the federal securities laws. These statements involve risks, uncertainties, and assumptions that may cause actual results to differ materially from those anticipated. You are advised to review the risk factors contained in our most recent annual and quarterly report Forms 10-K and 10-Q for a description of risks, uncertainties and assumptions related to the forward-looking statements. Management will be discussing some non-GAAP financial measures, such as EBITDA and liquid assets. You can find a reconciliation of these financial measures to the most comparable GAAP financial measures in the slide presentation. This call is intended for investors and analysts and may not be reproduced in the media in whole or in part without prior consent of TD Ameritrade. This morning we will be covering fiscal year ’08 results and fiscal year ’09 guidance. Our Chairman, Joe Moglia, will review fiscal year ’08 and Bill Gerber, our CFO, will comment on the September quarter results. Then we will focus on fiscal year ’09 -- Fred Tomczyk, our CEO, will frame our guidance and approach to ’09 and Bill Gerber will comment on the detailed assumptions supporting the outlook statement. At this time, I would like to turn the call over to Joe.

Thanks very much, Bill. Good morning, everybody. My name is Joe Moglia. I can’t tell you how proud I am of our sixth record year. Earnings were compounded at 33%. We’ve told you that every decision that we made in 2006 and 2007 was geared so we’d be able to deliver in 2008. I believe we have delivered on that promise. There are three reasons for why we had a record 2008 -- first, the active trader has been engaged the entire year. Secondly, we are finding that we have legitimate traction in the asset gathering space, and thirdly, we’ve managed our balance sheet in a way where it’s been a benefit to our shareholders. We had record earnings at $1.33. That’s up 25% of where we were a year ago, when the vast majority of financial services are significantly down, and this includes a one-time charge to keep our clients whole when the reserve fund broke the dollar. We’ve got record net revenues at $2.5 billion -- 59% of those revenues were driven by our assets. We’ve got record pretax income of $1.3 billion and we’ve got 50% pretax margins. We’ve got record net income of $804 million and record EBITDA of $1.4 billion, and our ROE came in at 31% for the year. When you take a look at the operating metrics for ’08, we had trades per day that were also a record of 312,000 and by the way, so far October to date, our number is 433,000. Our average spread-based balances were also a record at $25.5 billion. Our average fee-based balances were also a record at over $70 billion. Client assets came in at $279 million and our cash and money market funds also at a record of $52 billion. Net new assets -- guess…

Thanks, Joe. As you all know, we are experiencing unprecedented market conditions and the American consumer continues to exhibit signs of considerable stress. However, despite those things, TD Ameritrade has again delivered strong financial results. A record year and a strong fourth quarter are quite a feat for any company these days, especially if you are in the financial services industry. In the September quarter, we earned nearly $650 million of revenue, a 13% increase over the same period last year, and our EPS was $0.29. However, it was $0.32 if you exclude the $36 million one-time charge for the reserve fund issue. This amount is comprised of $27 million for our client commitments plus $9 million from the effect on our corporate funds. This $0.32 is down a penny from last year, primarily due to investments for growth and other one-time costs, which I will explain in a couple of minutes. As we have said many times, we have to run our business in good times and in bad. The prudent, strategic decisions that we have made and will continue to make regarding the growth of our company has served our shareholders quite well. Now before we get into the details of the quarter, let me spend a minute looking at our continued NNA traction, net new action traction, on slide 8. The investments we have made in our business over the course of the last 18 months continue to pay off, as is demonstrated by our growth in generating assets. In the September quarter, we generated $2.8 billion of net new assets, flat year over year. However, you need to analyze net new assets a bit deeper to understand what is truly going on. As you may recall, we closed on the Fiserv integration earlier in the quarter.…

Thank you, Bill and Joe, and good morning, everyone. Now before I begin discussing the coming year, I would like to take a moment to highlight what Joe has accomplished since he joined the TD Ameritrade team. The numbers speak for themselves and I am sure you are familiar with most of them. But Joe built TD Ameritrade to be the number one firm in terms of trades per day in our industry, almost tripling that number from 113,000 trades a day in 2001 to 312,000 trades per day in 2008. And growing client assets more than ten-fold from $24 billion back in 2001 to $278 billion. In terms of financial performance, he turned the company from being marginally profitable in 2001 to earn over $800 million, or $1.33 in earnings per share this past year, with pretax margins of 50% and a market cap that has grown to $10 billion from $700 million. He has been an aggressive consolidator of the industry, completing nine acquisitions in seven years, including TD Waterhouse, which was the biggest in the history of our industry and transformational for TD Ameritrade, bringing the company to number one in trades and over night putting it in the asset gathering side of our business. His track record is unrivaled, in my opinion, and I am glad he is staying on as our Chairman. He has been and will continue to be a great coach for me and our management team. Now let’s turn to 2009 and look at managing through this current cycle and the challenges and the opportunities that lie in front of us. Clearly we are in unprecedented times. The S&P has dropped 19% since September 30th and is down close to 40% from its high point one year ago. On October 16th, the…

Thanks, Fred. Now let me give you some color around the major drivers built into our 2009 EPS range on slide 15. But before I do that, I want to give you some information around the October activity, considering the extreme volatility we’ve had in the past few weeks. Trades per day, as we said, is averaging 433,000. Net new assets are in excess of $2 billion. Margin debt has dropped by about $2 billion as clients are lowering their risk profiles. Bad debt has been excellent and is about 0. And we have opened 75,000 new accounts. As you can tell, this is quite a strong start on virtually all of our key metrics in the first three weeks of 2009. Let’s hope the next 49 weeks can follow suit. So on to slide 15, here you can see the significant variables of our income statement and as you know, these have not changed. For 2009, we are assuming a trade per day range of 266,000 to 316,000. While October has been red hot in trading, with the headwinds facing the retail clients, we don’t expect this trend to continue indefinitely, thus we have a lower range for the year. Our average commission rate of $13.38 to $13.88 is slightly up over our September quarter 2008 as we expect our options business will continue to increase in 2009. On spread-based balances, despite the downturn in margin balances in early October, we expect growth in the two primary drivers here of MMDA and margin debt. We expect clients will increase $700 million to $3.7 billion in aggregate average spread balances in 2009 from the end of 2008 levels. The three key elements to the NIM compression we are seeing are as follows: one, we expect the mix of margin loans,…

(Operator Instructions) Our first question comes from Prashant Bhatia with Citigroup.

On the client trades, the 433,000 so far in October, do you have a feel for how many are buy trades versus sell trades, and maybe how that ratio relates to say the past year or so?

You know, I don’t off the top of my head. I have teasingly said we’ve had 12 buy trades and 432,988 sell trades but I don’t have that specific number.

Okay. Also on the organic growth side, you are really seeing a lot of traction there. Has there been any change in terms of transfers of accounts from full service firms? Are you seeing any change in the composition of what is driving the net new assets?

What we have seen in the last probably six to eight weeks has been -- you know, we typically get net new assets from a number of places and typically we are a winner from the full service brokerage firms and we definitely have seen a pick-up in that in the last four or five weeks.

Okay. And then I guess no better time to be cash rich with a clean balance sheet. I guess one, will you accelerate any kind of investment initiatives as a result of the environment? And two, on the acquisition side, we are seeing fed assisted and FDIC assisted deals -- is that something that would interest you or are you having any discussions around that?

First off, I think the capital markets are very strange, so building cash right now is exactly the right thing to do. We are investing. The three areas where we will focus our investments for the most part looking forward beyond what we have already done but well within our current expense levels will be in increasing the size of our sales force, in our education and risk management tools and techniques for the traders, and increasingly in our technology operations to position us for the kind of volumes we are seeing and expect to see. Clearly we are seeing very high volumes and we are going to continue to invest there.

Okay.

With respect to acquisitions, we will always do what we think is right for our organization and any opportunity that comes along that makes sense for our shareholders, we will work very hard to do that.

Okay.

And I can tell you on a dollar basis on the trades, we are all through the month, so far we are net $30 million of net sellers, so it’s -- on a dollar basis, obviously it’s pretty flat. I can’t tell you on a buy and sell on a per trade basis but that will give you some indication of what’s going on.

Okay, that’s interesting. And then just finally on the [inaudible] lending revenue on the non-conduit side, the balances don’t move around much but the revenue does. What is driving the volatility in that revenue?

On the spread-based side?

Yeah.

It’s really -- you get between the -- it’s more mix between the MMDA and margin loans, and that’s really what causes -- I mean, MMDA -- margin loans is our highest yielding asset. MMDA is a good one too but that’s what really causes it to jump around.

Well, I guess I’m talking about the [SEC] lending, the non-conduit side of the [SEC] lending revenue, where we see in some quarters negative $68 million and in others we see gains of $10 million, that line specifically.

I’m sorry, on the stock borrow, stock loan business?

Yeah.

Okay. What happens in certain quarters is you get what’s called negative spreads when some of your stocks are so valuable that people not only give you their cash, they pay you for it because they need the securities, and so those anomalies really do -- they are obviously very profitable, we love those, but that’s what really causes the biggest difference, where you sometimes get a negative, it’s a profit center and sometimes where it is a slight expense.

Okay. Thank you.

Our next question comes from Rich Repetto with Sandler O'Neill.

I guess the first question is on the margin loans. You mentioned that it was down $2 billion in October, and I guess the question, you know, Joe has always said in the past the margin loans are a lagging indicator and we always take what Joe says as gospel, but it appears different this time. And I guess the question is one, what percent -- like, I don’t know the exact ending balance of September, so what percentage of decline is that in margin loan balances? And then it obviously looks like it is different, so is it something about the make-up of who has been driving the trading going in that now the leveraging of the retail is a leading indicator of trade?

The margin loans are down about a third since September 30th. We analyzed this because we did look at it, given the decline. We are actually not seeing a change in behavior or people not using buying power [or any of that]. All we are seeing is the fall in the market and the value of securities is reducing our absolute buying power, but the percentage of people using margin and the percentage of their buying power they are using continues to be at a similar rate to what it was through 2008.

Okay, so it’s more market impact --

Market driven.

Okay. I guess we can talk about it more after. I guess the next question is normally in the calendar third quarter, you know, your fiscal fourth, you pull back in marketing and [you increased] it and I didn’t -- you know, the accounts were up slightly but the acquisition costs, and you are seeing a whole -- you are running at a double your new account rate, I think, in October. So what is going on? Did you see opportunities here? And why the up-tick in marketing in what is normally a seasonally slow period?

We were spending our marketing dollars roughly in line with what we would have normally done in our fourth quarter. You are talking about the third quarter for you, in your mind. As we came out of August and into September, we saw opportunity. We were having a very good, healthy new accounts and everything and we saw what we happening in financial services, so we upped our marketing spend intentionally to give us, to allow us to finish off the year strong and set ourselves up for a very good start in October, and I think you are seeing the benefits of some of that as you look at October right now, our net new assets month to date are over $2 billion and our new accounts are over 75,000 and that was an intentional strategy as we saw the dislocation in the market late August, early September.

Okay, that’s interesting. And I guess last question, just to keep Bill straight here, the liquid assets from last quarter, the last quarter’s presentation showed it at 687 ending last quarter at 687. And this presentation we’re starting at 660, so I was wondering -- did you take this $27 million here?

No, it was actually something when we had the final focus report, we had -- we used an estimate at the end of last quarter and when we had the final one, we had a $27 million swing.

Okay. All right, thanks, guys.

Our next question comes from Howard Chen with Credit Suisse.

First, you continue to see this incredible retail engagement. Can you give us a sense of behavior by the different customer segments? If DARTS were up 14% year over year, how did that vary among the more active trader customers compared to say a more classic, [mass affluent] customer?

I’ll comment on that probably over the year but more recently as well. We continue to see the active trader very engaged and as long as there is volatility in the market and you look at a day like yesterday, where the market was down at 700 points or close to 700 points at one time and then came back, anytime you have that level of volatility, active traders will trade. And we are seeing them increasingly use our tools like strategy desk, their increasing use of options, increasing use of trade triggers and trailing stops and so we are seeing them using all those tools at a much higher rate than we’ve seen in the past. So they have continued to be very engaged and continue to be very engaged so far in October. When you come to the less active or as you call it, the long-term investor, those people are trading a little bit more in more recent times as the market has moved. Whether they are reevaluating their risk tolerance and moving some of their money into more conservative investments or adjusting their asset allocation, the long-term investor right now anyway is trading a little bit more than normal.

Okay, great. Thanks, Fred. And as you migrate to more of an asset gathering business model, I think market appreciation/depreciation factors more in the equation for TD Ameritrade than it used to. So for the outlook and as you build the budget, what are you assuming in terms of market appreciation for fiscal ’09? And does that include the October to date downturn?

We are assuming about a 5% appreciation over the year.

Okay, so that would be inclusive of what we felt October to date, Fred?

That’s right.

Great, thanks. And then finally, Bill, on the new outlook statement, it looks to me like you are assuming debt interest costs are stable in fiscal ’09 but -- I’m sorry, can you refresh me on the terms of the debt? I thought it was variable so shouldn’t you receive some benefit from lower rates?

There will be some benefit from lower rates, yes, but we think that we are not going to be paying off much of the principal. The principal payments are going to be just the minimums because we have a great term here on our debt, but there will be a slight decrease, yeah.

Okay, so less principal payments but then you get the benefit of the lower variable rate, and all that should shake out to kind of like flattish interest expense?

Correct.

Okay, great. Thanks so much.

Our next question comes from William Tanona with Goldman Sachs.

In terms of the guidance, just so I can understand a little bit, the fed funds forecast, what are you guys assuming for that, or where fed funds will be ultimately? And then in terms of just doing the math, it looks like you guys are assuming either significantly lower tax rate or some share buy-back, or a combination of.

We just are using the 150 as the fed funds rate, so we don’t forecast fed funds rate changes, so that’s where the current model is. And the tax rate should be about the 38%, so I’ll have to look at the -- I mean, the buy-back from 2008, of course, and -- hang on a second. And we did have the benefit in 2008 of the tax rate, we did have the $0.03 in the first quarter last year, so that’s one of the effects.

Okay.

Does that make sense?

It does. It was just when I was doing kind of the math, it looked like to get to the lower end of the guidance, you’d have to assume a 34% tax rate if the share count stayed the same, so I was just wondering whether or not you guys were building in some type of a share repurchase in the guidance. In terms of the record net new assets that you guys talked about, is that going back to kind of ’99, 2000 with the combination of both Ameritrade and TD Waterhouse?

In terms of being a record?

Yes.

Yes.

And then just lastly in terms of the customer behavior, obviously if you look at cash as a percentage of assets, it looks like it is about 19%. Certainly the investor seems to be getting a little bit more conservative but I guess the one area that you didn’t talk about for October was where customer assets ultimately are now. I think you gave all the other metrics but not customer assets.

They are about $240 billion right now, I believe. That’s very close to where they are right now.

Okay, thanks.

Our next question comes from Roger Freeman with Barclays Capital.

I just want to come back to the -- sort of the activity levels again. I know it’s hard to forecast but we’ve certainly seen a sharp slowdown in trading activity among institutional investors over the past week or so and historically retail lags two to four weeks on market developments, et cetera. I mean, is there any reason to think that we wouldn’t see a freezing up in retail space like we’ve seen among professional institutional investors over the past couple of weeks?

Well obviously, Roger, I mean, I think we are being fairly cautious in calling trades for the year, as I do think there’s an unprecedented level of uncertainty in the markets right now. And I think we will come down from the 433,000 trades per day. We did have four of our top 10 trading days have happened since the end of September. However, having said that, I would say while it’s come off from that level, it’s still at a very healthy level so far and so far this -- even including this week. We’re not seeing it come off significantly from what you would have seen through 2008.

And actually just to follow-up I think on Howard’s question earlier, I mean, if you look at that, you said both your traditional active trader volumes are up. Has the mix changed? I.E., has the active trader become significantly more active? Has there been a shift up towards that customer?

No, I think if you are looking for a shift right now, you would see the long-term investor trading more than normal, compared to more stable markets. But the active trader has continued at the same lip. I think some of the blip up here has been more in the long-term investor.

Got it, okay. And then on the -- I think you made a comment in the prepared remarks around needing more or better FDIC products. Can you just maybe go into that a little bit more? I mean, it looks like you are holding on to cash balances [to the extent] that there are -- you know, that customers are selling stocks and actually, you could argue that money markets maybe become more attractive now that there’s essentially backing for those and any commercial paper that would be purchased in those money markets. So what are your thoughts around the FDIC products and what you actually need to do there?

Well today, what we have is the money market deposit account, which is a FDIC insured product and it is our cash, one of our cash [sweep] options. And we think we have some room to improve there. We have segmented our customer base down and we are looking to increase the competitiveness of our cash earn rates for our more valuable clients in our higher value segments, so we will start to move down that path, which allows us to be much more scientific in our pricing and increase the competitiveness of our offering. On top of that, we are looking at things like a high interest savings account and other products where people want to park cash for a while. That has an FDIC insurance guarantee on it. When you look at the money market mutual funds, why I made the comments I did about that guarantee program, I think it’s important to keep in mind that that’s not a long-term guarantee. It’s a three-month guarantee that can be renewed for up to a period of one year, and I think most people don’t realize yet that as well that basically not all funds are eligible, not all companies have applied, even if they are eligible, and number three, it only covers the money you had in that account on September the 19th in that fund. So if you put new money into that money market mutual fund, it is not covered for the federal government guarantee.

Okay, that’s helpful. And then I guess lastly, around options, so you are forecasting a higher mix there next year in terms of your average commission rate. Is it more a function of declining equity trades or is that actually a higher options trades? And what actually is the mix and what are you forecasting for volatility next year, because obviously that’s got to be a key factor in your thinking there?

We continue to see increased use of options by our clients, so it’s not a decline in equity trades -- it’s an increase in option trades. Our option trades are up 45% year over year. The market option volumes have been up 35% year over year. Our education and risk management continue to show people how to prudently use options appropriately, whether you are earning cash income or you are protecting positions and hedging positions. And so we do see an increase in the volume of option trades for us.

But you probably expect still high levels of volatility going into next year in the equity markets that would support --

I would think so.

Okay, thanks.

Our next question comes from Michael Vinciquerra with BMO Capital Markets.

You mentioned the high yield savings account -- can we assume that that is still going to be parked over at TD Bank U.S.A, or is something else in the works?

Well first, it’s a high interest savings account, not a high yield account. But anyway, it will be at TD Bank. They are -- our arrangement with TD Bank actually works quite well for us, that we get the economics and the profits of banking without the risks and the capital requirements of banking, so why we would do it anywhere else, I don’t know.

Do you have any risk at all of cannibalizing the sweep account that you offer right now? I think your margins there are very attractive and I would guess on a high yield savings account that you would actually have a -- you know, you were offering 2%, 3%, versus I guess you are yielding today probably what, 1%, 1.5%?

Well, it depends on what chair you are in on the MMDA but yes, there are risks of some cannibalization, but I’d make two points on that. First off, we have to go where the market goes and we have to do what is in the best interests of our clients and right now for people that do want to park cash for a period of time, that is a good solution and we need to make that available for our clients. Number two, as I think you deal with the cannibalization risk through the product design and the pricing of the product, through minimums and tiering of interest rates, and so I do think there are ways to minimize that capitalization but there will be some. But again, you have to do what is right for your clients and for your business in the long-term.

I understand. Okay, and then one final thing -- have you guys done an analysis to look at the correlation of your client asset balances versus the broader market indices, kind of net of new flows? It kind of follows up on a question earlier. I guess I am getting to the point of you obviously have cash balances that don’t fluctuate with the market but have you looked at it over the long haul and seen for our modeling purposes what we might expect from your clients’ asset levels?

I’m not sure we’ve done anything as in-depth as you are suggesting, Mike. I mean -- so probably just the easy answer is no.

Fair enough. Okay, thank you, guys.

But Mike, just to follow-up on that, I do think you need to look at our sources of our revenue stream. While 60% is asset based, a fair chunk of that asset based revenue is actually net interest income.

Absolutely. Okay, thank you.

Our next question comes from Michael Carrier with UBS.

Bill, just a couple of questions on the outlook -- just on the options, mixer, I guess the growth in options. We’ve been at an extreme level and if volatility does decline and hopefully it does, you know, you’d expect the volumes to start to moderate. So I’m just -- you know, when I look at the commission rate next year going up, is it more taking options market share or is it more your clients actually trading more options and volumes going up from already elevated levels?

It’s actually our clients are trading more and we do believe we are gaining market share as well. We are looking at ultimately going from like 12% -- we’re 12% now and if you think about it, last year we were around 9%, to going up to 14%. So that’s really the shift.

And the volatility will come in from where it is right now. I think options, there are lots of reasons to use options and the revenue on an option trade is over double what it is on an equity trade.

Okay. Just on the relationship with TD Bank, I mean, I understand in terms of the MMDA product, they kind of bear the credit exposure. I’m just wondering in terms of the rate that you get, given that even safe assets have been at risk, just in terms of their portfolio that they are investing, you know, the cash in, are there any concerns or risks that even the safe assets could come under pressure and the fee that you would be getting from them could be lower?

Well, the fee that we get from TD Bank actually doesn’t intrinsically tie to the assets they invest in any longer. We changed that deal and we talked about that at the last quarter end. We now get LIBOR minus 25 basis points, regardless of where and how they invest those assets. Having said that, we do sit on their [ALCO] committee to make sure that where they are investing that money is within a defined and agreed-to risk policy.

Okay, and then just finally on the cash level -- obviously having cash is good and building it is prudent in this environment. I’m just wondering, at a certain price in terms of the stock, does it make sense to start increasing buy-backs? It doesn’t mean that you have to take a big chunk of the cash but just incrementally, just given where the level of the stock is and what the return is?

I think we are in the market every day. We do have a program to buy back stock and certainly at these prices, the way that is designed, we are buying increased levels of shares every day in the market at these prices. Having said all that, I do think there is an opportunity, whether it be share buy-backs or dividends or whatever, once the market returns to normalcy. But right now it is anything but normal and to raise capital in today’s environment is not an easy feat and it’s not cheap and until the market returns to a normal state, we will continue to build cash.

Okay, and then Bill, I didn’t see the Michigan colors on the slides. I didn’t know if that was a read through for anything.

I’m taking my bruises. It’s more black-and-blue than maize-and-blue, so --

All right, thanks, guys.

Our next question comes from Patrick O'Shaughnessy with Raymond James.

I was wondering if you could contrast what you are seeing from the retail investor today as compared to the last bear market that we saw in the 2001/2002 timeframe, because I think the online brokerage industry is still relatively young, people only have one reference to look at a bear market so I was hoping you could kind of contrast the differences in their behavior now versus what we saw the last time things looked pretty bleak.

Well, I wasn’t here back in the tech bubble but I do think the tech bubble, from what I’ve analyzed here, it was a very different situation. It was a bubble on a sector of the economy and a lot of the trading was tied to that. Our trading today is much more broad-based, and this is a very different cycle of a -- it’s a very different market today. This is not about one sector of the economy. The whole economy is down right now. It is certainly led by the credit cycle but what we are seeing in the money markets and the credit markets seizing up the way they are is where we are seeing -- I’ve never seen that before. With respect to their trading though, they continue to trade in a number of sectors. They do like, what we are seeing right now, technology and increasingly health care is where people are buying shares right now.

Got it. And then my last question would be your yield on your investment product balances rose a little bit from the previous quarter and I’m just curious, is that some sort of a mix issue or what sort of products are you seeing growth in that that’s driving the increase in yield?

It is mix issue, Patrick, and basically it’s -- you know, we are getting -- sometimes you get timing on 12B1 fees that come in at certain periods, so that’s really the major driver there.

Got it. Thanks.

Our next question comes from Michael Goldberg with Desjardins Securities.

Next week the green shields at TD Bank in the mid-Atlantic begin rolling out. Do you want to talk about what you are doing and what you will be doing to increase revenue and expense synergies with them?

Thanks, Michael. I think there’s a couple of things we are doing with TD. They are very early in the stages. The first obviously is our MMDA program and we’ll do the high interest savings account with them. We are also -- we are working right now, very early stages, of trying to originate accounts and assets out of their branch network and out of their customer base. We are working diligently with them on that. We don’t have that right yet and it’s only in I think about 16 branches, and we will just keep working on it until we get it right, because I think as you are aware, Michael, it’s a very big source of accounts and assets in Canada. But the U.S. market is different, but I think this is the first time you will see a leading bank and a leading online broker actually try to do this, so we are going to work very, very hard at that. We are also working with TD Waterhouse in the U.K. for something that we might be able to do there where we give them access to the U.S. market for their clients in Europe and some of our tools if they want to trade in the U.S. but again, that’s very early stages of discussions right now.

Okay. What are the key criteria that you would look at before making an acquisition, given market turbulence?

Well, the first thing we want to avoid is buying someone else’s problems, unless we can understand those problems and we can quantify those problems and those risks, and so that we know what we are getting into. And very much we’ll look at A, if it’s a trading business, we see those are actually very economically attractive from a financial point of view. The scale benefits are significant. We’ll also look at one’s add-to capabilities that give us something we are trying to do or we see attractive for our customer base or for the market in general.

Thanks a lot.

Our next question comes from Brian Bedell with Merrill Lynch.

Just on that last question on acquisitions, just remind us, if you can, on your sort of view about taking on any credit risk in an acquisition from lending businesses.

Well, we have I would say -- we’ve been very diligent in avoiding the U.S. real estate credit risk. We don’t have what I’ll call capabilities or competencies to manage out a problem book of assets, so that’s not something we at TD Ameritrade would be interested in. If TD Bank was interested in that and could quantify it, they have those capabilities, we do not. If we could understand the risk, we could quantify it, and we are comfortable with it, that would weigh in to any equation but right now, we are not looking at anybody that’s got big credit risk on their bank unless we can isolate that and not take it in any transaction.

Right, so if there were an acquisition that had that profile, you would -- and if it were attractive, you would structure it in more of a lift out of the brokerage business and any of the credit risk would have to be sort of partnered -- you know, you’d have to seek a partner to take on the credit risk?

There are some things attractive on the deposit gathering side of banking and if you take some assets with that, but we are really not interested in acquiring somebody’s toxic assets. There are situations where they think -- you know, Prashant hinted at about FDIC help and all of that. We would only do those types of things in conjunction with TD, who has a much better capability in those areas than we do.

Okay, I just wanted to make sure you reaffirmed that. Okay, and then just on the -- a couple of questions ago about the TD arrangement in terms of getting LIBOR less 20 basis points, on the asset side of that, my understanding is that you do assume the credit risk but you sit on the [ALCO] committee and obviously I think they are still investing in Canadian mortgage backed securities -- if I’m correct on that, you can tell me but can you just remind us of your view of the risk level of Canadian mortgage-backed securities?

Canadian mortgage-backed securities are fully backed by the Canadian Government and so the risk level on that we see is very, very low. And the credit risk -- we are not taking credit risk. That was the change that Fred referred to earlier. We don’t take credit risk on the portfolio anymore. We went to a funds transfer pricing mechanism and we get the LIBOR less 25 basis points.

Right, okay. That’s great. And then just if you could talk about the expense initiatives in 2009, it looks like obviously you have generally flat expenses but some increases in advertising. How do you feel about system capacity? Obviously it has been moving up significantly. I think in the past you said you have made some investments there that you feel comfortable but going into 2009, should we see some of this expense base be invested in improvements in capacity or is there risk to more expenditures in that area in ’09?

Well, we have made significant investments in our technology infrastructure through 2008. All were either around security capacity or resiliency in our systems, and we have increased our capacity of our trading systems and back office systems significantly, and thank God we did that now, given the volumes we’ve been seeing. As we go into 2009, I look at that from a technology side in terms of the depreciation and amortization line. We will open a new data center. We are well down that path to actually house our infrastructure. You will see a bit of a hump year in 2009 in terms of technology infrastructure costs but then it should start to come out, and whenever you move data centers, you are going to carry duplicate costs for a period of time. But we will get to the other side of that as we come out of 2009.

And that’s in your expense budget and your outlook statement already, right?

It is.

Okay, and then just in terms of the operating margin on the expenses, I see the range is 46% to 51%. I know you like to target that sort of 50%-plus zone. Can you just give us a sense of what you might try to do to be towards the upper end of that range, even if your revenue outlook is sort of in the middle of the range?

Well, first off, we’ve been consistent in saying that once we stay at 50% or higher, we will continue to invest to try -- at that point, it’s all about growth, in our mind, and we will try to manage at that 50% or higher but we will stay within a range of 45 to 55. I don’t think -- we’re not trying to run the company to drive the margins to 60% to 70%. We are trying to get -- 50% to 55% is excellent and as long as we are growing, we think that’s the right strategy for us. If it comes off a bit, you know, we’ll do what we have to do. We are -- we will in this environment, I think it would be imprudent of us as management not to re-prioritize some of our initiatives towards the efficiency side from the revenue generating side. We will also pare back on some discretionary expenses, and we also have a fair bit of movement in our variable pay and incentive comp and variable costs that will move up and down if revenues and earnings do not come to fruition. So we’ll look at all those and if we see the environment turn such that it is longer and deeper than we think, and if all of a sudden our investments in growth, our growth initiatives are not working the way we would like, we will make adjustments accordingly.

Okay, great, that’s helpful. And then just lastly on your [wallet share], that’s still about 12%?

Say that again, sorry?

[Do you still view your wallet share] as being about 12% currently?

Yeah, we would say it is currently in around that range. It’s not a -- that’s an indicative measure, not what I’ll call a definitive, accurate measure that you measure every month. It’s something you do every once in a while that just -- I would use that number as indicative of where we see opportunity, as opposed to a key success metric that we can track every month or every quarter.

Right, so just -- I know you look at Schwab as well, that they have a 50% plus wallet share and obviously this portends great opportunity for you guys if you can emulate that strategy. Is there any sense of where you would like to be in say three years from that 12%, in sort of a broad range?

I think moving that share of wallet up to the 50% range would be lovely. I don’t think that’s necessarily realistic in three years but we have said if we can get that up to about 20% over a three- or four-year period, I think that would be doing quite well, because that would be basically a doubling of our asset base.

Right, yeah, and that would portend good things for organic growth. Great, thanks so much.

It appears our final question in the queue is a follow-up from Rich Repetto with Sandler O'Neill.

I’m good, guys, my question has been asked and answered. Thank you.

Okay, thanks, everyone and --

Thanks, everyone and we look forward to talking to you as we move through 2009. Have a good day.

That does conclude today’s conference call. You may now disconnect.