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Tuesday, October 17, 2017

TD's NTF ETF Platform Expands, Minus a Giant

News summary by MFWire's editors

TD Ameritrade is dramatically shaking up its NTF ETF platform, adding hundreds of ETFs and four more fund firms while also cutting a huge player.

Today the Omaha, Nebraska-based online brokerage and RIA custodian will nearly triple the number of ETFs available through its commission-free trading platform, Jim Dario, managing director of product management for TD Ameritrade Institutional, confirmed yesterday. That expansion will add in newcomers AGFiQ QuantShares, First Trust, J.P. Morgan, and ProShares. Yet the platform will also now be missing one of the big three: Vanguard.

The Wall Street Journal broke the news that Vanguard would no longer be part of the TD Ameritrade NTF ETF platform.

The total number of ETFs on the platform will increase to 296, from 100. Beyond the four newcomers, the platform will also continue to include ETFs from four other providers, all giants: BlackRock's iShares, Invesco's PowerShares, SSgA, and WisdomTree. TD claims that the upgraded platform will have more commission-free ETFs than any other platform in the industry. The move follows the creation this spring of a strategic relationship between TD and quasi-indexer DFA, which lowered the trading costs for using DFA funds on TD's platform.

TD is not the first platform to partially cut Vanguard off this year. In May, Morgan Stanley began restricting sales of Vanguard's traditional open-end mutual funds, though Vanguard ETFs were unaffected.

Distribution-savvy fundsters may not surprised by the platform moves away from Vanguard and may wonder if other platforms will do the same. On the one hand, Vanguard is the biggest mutual fund shop around and the second biggest ETF shop, with big marketshare when it comes to net ETF inflows. Yet Vanguard famously and publicly refuses to pay platform fees for distribution. Combine that with an NTF platform and the platform would get no money from any party involved with a Vanguard ETF. And TD and other platforms, like any business cannot work for free.

Indeed, "certain fund providers pay [TD Ameritrade] for certain shareholder, administrative and other services," Marco De Freitas confirms to the WSJ. (De Freitas is managing director and head of retail strategy, product and digital at TD.) Early this year news broke that ETF shops pay Morgan Stanley between $50,000 and $550,000 for ETF data and platform access.

TD's NTF ETF platform first launched seven years ago with 101 ETFs "evaluated and selected" by Morningstar Associates. 

Edited by: Neil Anderson, Managing Editor

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