Schwab CEO Calls Building Trading Algorithms For Clients 'A Fool's Errand' And Maps Prediction Markets Rollout
Rick Wurster said Schwab blocks AI agents from logging in for clients and sees prediction markets growing over 12 to 18 months.
Schwab CEO Rick Wurster said on the company's fall business update call Thursday that supplying trading algorithms to clients is "highly unlikely," calling the idea "a fool's errand and could lead to a lot of trouble." In the same call he laid out a path into prediction markets over "the next 12 to 18 months," while Schwab shares were down about 5% at $91.95 as of 9:56 a.m. ET Thursday.
Where Schwab draws the line on AI
Asked by an analyst whether Schwab might build automated trading capabilities for clients, Wurster said clients may be able to use outside AI models to research factors and create strategies, and some already do through Schwab's APIs. Providing the algorithms itself is different, he said, because if a magic recipe for beating markets existed, firms with far more money in quantitative strategies would already have it.
On access, Wurster said Schwab already blocks AI agents that try to log in on a client's behalf. He called that route unsafe. He said he gets a daily report on how often an agent is blocked, and the number is not large.
Outside models can connect through Schwab's MCP servers, the layer that lets an AI model plug into its systems. Schwab controls authentication there and does not let them move money, because Wurster said the risk to the client and the firm is too high. A pilot for traders began with Claude and will widen to more clients and models in the coming months.
Wurster said AI has lifted client engagement, and he pointed to a correlation between the arrival of large language models and the rise in engagement. He also said developers are about 25% more productive than last year.
Prediction markets and crypto
Responding to a Morgan Stanley analyst, Wurster said Schwab already offers binary options on the S&P. Over the coming year or so it will add financially related events and company KPIs, such as whether earnings beat or the number of cars a company delivers in a quarter. It will stay away from sports.
He said the buildout over the next 12 to 18 months should eventually reach a broad suite covering financial, KPI and political events. Schwab is working with the CBOE and will roll out its version inside thinkorswim, he said.
He said around-the-clock trading draws limited interest: 1% to 2% of trading activity happens outside market hours. Schwab wants to offer access anyway, he said, for overseas clients and people working during the day.
Wurster listed crypto and prediction markets among new transaction-based revenue streams. Schwab clients can now access its crypto offering, and three new coins are due by the end of the year.
The quarter behind the call
Wurster said third-quarter net revenue reached a record $7.2 billion, with adjusted earnings per share of $1.69, up 29% from a year earlier. Core net new assets were $190 billion, up 38%.
Chief Financial Officer Mike Verdeschi said fourth-quarter net interest margin should expand roughly 25 to 30 basis points from the fourth quarter of 2025. He said revenue and full-year margin should land toward the lower end of the summer ranges, with expenses at the low end of theirs.
Verdeschi said Schwab will give a more detailed 2027 financial scenario at its winter business update in January, and Wurster said Charlie, its AI assistant, will reach all clients in the coming months.
Sources
- Exploring Analyst Estimates for Charles Schwab (SCHW) Q3 Earnings, Beyond Revenue and EPS — Yahoo Finance
- Charles Schwab shares dip after Q3 revenue disappoints, earnings top consensus (SCHW:NYSE) | Seeking Alpha — seekingalpha.com
- Charles Schwab Profits Climb On New Assets, More Lending — The Wall Street Journal
- Can Robust Trading, Higher NIR Support Schwab's Q3 Earnings? — Yahoo Finance
- Why Charles Schwab Stock Matters More When 10 Year Treasury Yields Hit 5% — Yahoo Finance
