“Now assuming the Fed follows through as expected, we would expect that process to return. The 2015 to 2019 period is a reasonable reference point for our expectations this cycle, but there are a number of different dynamics this time around that could influence that behavior.”

In context

“ur clients hold tends to grow with the growth in accounts and the growth in total client assets and how much of that cash sits on our balance sheet, primarily in our bank sweep and broker-dealer free credit products. Well, that varies based off the level of primarily short-term interest rates. When the Fed funds rate increases, solutions like purchase money funds and CDs are able to offer more meaningful yields. So clients tend to move more of their so-called investment cash off our balance sheet into these higher-yielding alternatives. It's what we've called client cash sorting. Now in 2015 to 2019, the client cash sorting produced a roughly 20% reduction in uninvested or sweep cash balances over a 3-year period once the Fed started tightening until those balances resumed growing again. Now assuming the Fed follows through as expected, we would expect that process to return. The 2015 to 2019 period is a reasonable reference point for our expectations this cycle, but there are a number of different dynamics this time around that could influence that behavior. At the same time, we'd expect to see continued growth in bank lending, as Rick discussed, as we improve the PAL process, make our lending solutions available to legacy Ameritrade clients and continue to increase awareness of our very competitive mortgage rates. And given the way the LCR, or liquidity coverage ratio, calculation works, we need to maintain stable or even growing free credit balances within the broker-dealers to support our margin book. So any sorting that happens there needs to be replaced by transferring balances out of bank sweep. Now with higher rates, we'd also expect paydowns to slow. Now we have plenty of liquid assets and borrowing capacity to support outflows. But we'd rather not sell assets potentially at a loss or have to rely on higher-cost FHLB borrowing on a”