After reporting steep profit drops on Tuesday, the top two U.S. online brokerages asked for patience as they face more of the same low interest rates and hope their clients return to the markets in force this year.

Charles Schwab Corp said its quarterly earnings tumbled 47 percent, while smaller rival TD Ameritrade Holding Corp reported a 26 percent drop. Both results missed Wall Street expectations.

Overhanging the results were near-zero U.S. interest rates, which hamper the companies' ability to earn interest from assets under management, and have forced them to waive hundreds of millions in fees from money market funds this year.

Daily trading slumped in the latest quarter, reflecting lower volatility and the expected holiday slowdown. Still, analysts and investors wonder whether the individual investors that drive the online brokers' growth will stage a repeat of last year.

They both face the dual headwinds of lower interest rates, and likely lower trading volumes than they benefited from in 2009, said Patrick O'Shaughnessy, analyst at Raymond James. It's going to create an environment where these companies are going to struggle to grow earnings.

An increasing number of analysts do not expect interest rates to rise this year, instead targeting early next year. That has kept downward pressure on online brokers' shares.

The near-zero interest rate environment has and will continue to effect us, but we will stay very focused... TD Ameritrade Chief Executive Fred Tomczyk told analysts and media on a conference call Tuesday.

Charles Schwab, chairman of the company he founded, said in a statement: We remain convinced that sustained investment in our clients, particularly in tough economic the best way to pursue the tremendous growth opportunities still ahead of us.

Schwab shares declined after the close of markets, when it reported results. TD Ameritrade shares jumped 3.3 percent after reporting in the morning, but they handed back most of those gains after Schwab's report.

Market volatility, a measure of investor uncertainty, tumbled throughout 2009, undercutting trading activity in the second half of the year.

TD Ameritrade said daily average revenue trades, or DARTS, dropped 8 percent from the previous quarter and were down 7 percent from November to December. At Schwab, which is less reliant on trading, quarterly activity dropped 3 percent, including a 3 percent decline from November to December.

Sandler O'Neill analyst Richard Repetto expects a flat to modest increase in trading in 2010, noting the phenomena of trading in a few high-volume stocks -- like Citigroup Inc and American International Group -- could decline.

Some analysts lowered their earnings estimates on TD Ameritrade, which boasts the largest U.S. discount trading platform.

With such a long time horizon and the prospects of rising rates in 2010 appearing dim, we are remaining on the sidelines and are awaiting a better entry point, particularly with signs of slowing retail trading activity, FBR Capital Markets analyst Matt Snowling wrote in a note on TD Ameritrade.

Elsewhere, Schwab on Tuesday lowered trading fees for its less active traders by about $4 to $8.95 per trade, a move announced earlier this month that analysts said could spark a pricing war after some five years of relative stability. The fee change effects up to a third of Schwab's overall trading.

TD Ameritrade said the move has so far had no impact on clients, and repeated it had no current plans to adjust its flat rate of $9.99 per trade for all clients.

(Reporting by Jonathan Spicer, editing by Leslie Gevirtz)