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Brokerage CEO: Small investors are back, baby!

April 29, 2014: 4:56 PM ET

TD Ameritrade CEO Fred Tomczyk says individual investors are getting back into the markets at a record pace.

Individual investors are jumping back into the market at a record pace, according to Fred Tomczyk, CEO of online brokerage firm TD Ameritrade.

"People are generally more bullish on the U.S. economy," Tomczyk told CNNMoney at the Milken Institute Global Conference in Los Angeles Tuesday.

Tomczyk said that trading volume on TD Ameritrade (AMTD) hit all-time highs in the first quarter of 2014, a trend that's been echoed in earnings reports by TD and other online brokerages such as Schwab (SCHW) and E* Trade (ETFC). The surge in trading by so-called small or "mom and pop" investors comes over a period when the markets experienced a lot of volatility.

Related: Stocks: Let's put the volatility in context

"It started five months ago, but it's been building," he said. "When the market has a little bit of chop, that's a good market for us."

Tomczyk also noted that "buying on margin," or borrowing money to purchase stock, also reached a record for TD Ameritrade in the first three months of the year.  Buying on margin is a game of high risk and high reward, as gains as well as losses are amplified.

Despite strong first quarter earnings for TD Ameritrade, the stock took a beating after the release of Michael Lewis' book "Flash Boys" and subsequent TV interviews where the author claimed the market is rigged in favor of high frequency traders.

Related: Michael Lewis says markets are rigged

In the book, Lewis takes aim at what's known as "payment for order flow," a practice in which brokerages receive compensation for routing clients' orders to third parties, including high frequency trading firms, to execute.

But Tomczyk shrugged off concerns about the system.

"Payment for order flow has been around a long time, the SEC has looked at it," he said.

Tomczyk said his company doesn't disclose the revenue it brings in from the practice, but many analysts think it's a lucrative chunk of business for brokerages.

The bottom line is brokerages are benefiting from the return of the individual investor, a significant turn of events after the recession when many Americans lost confidence in the markets.

"People want to get back to normal," Tomczyk said. "It's been a long, tough crisis."

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    Spring break means different things to different people.

    For kids, it's the Easter Bunny. For college students, a Mexican booze cruise.

    But for many overworked Wall Streeters, it may just be a good book.

    "I'm sitting here reading about finance 12 hours a day, so that's the last thing I want to pick up when I go home," said David Lutz, head of exchange traded fund trading at Stifel Nicolaus in Baltimore, Maryland.

    About three years ago, Lutz was MORE

    - Apr 18, 2014 7:00 AM ET
  • Why Michael Lewis is wrong

    by Lee Munson

    I love you, New York City, but you're killing me. There's a reason I stay in my remote third world country called New Mexico.

    The media focus on Michael Lewis' new book, "Flash Boys: A Wall Street Revolt," irritates the hell out of me.

    Lewis wants everyone to get worked up about high-frequency trading (dubbed HFT for short). Balderdash. This is an old subject with little relevance to individual investors.

    Here's MORE

    Apr 3, 2014 3:20 PM ET
  • Flash Boys face off: Michael Lewis on CNBC

    High-frequency trading is the talk of Wall Street this week, but it turned to high-frequency blows today when Michael Lewis went on CNBC to discuss his controversial new book "Flash Boys".

    Lewis appeared with Brad Katsuyama, one of the few heroes in his book, to discuss the issues with rapid trading and whether the stock market is "rigged".

    Things got a little heated when the president of BATS Global Markets, a stock MORE

    Apr 1, 2014 3:50 PM ET
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