eTrade 2000 Annual Report Download - page 21

Critical to our global strategy are our local operations in both the retail and institutional businesses. During fiscal 2000, we launched
E*TRADE retail branded sites in Japan, Korea, Denmark and Norway. However, we terminated our relationship with CPR E*TRADE
in France in September 2000 and are now evaluating new opportunities in the French market. To date, we operate nine non-U.S. Web
sites globally through a combination of licensees, in which we have either a minority or majority ownership, and wholly-owned
subsidiaries. At September30, 2000, our wholly-owned subsidiaries include: E*TRADE U.K., E*TRADE Nordic AB, and E*TRADE
NetBourse, acquired in the first quarter of fiscal 2000; VERSUS, acquired in August 2000; and E*TRADE South Africa, acquired in
September 2000. In addition to our wholly-owned subsidiaries, we also hold a majority ownership in E*TRADE Germany AG, which
increased to 100% in the first quarter of fiscal 2001. Our international Web sites are operated by the following entities: E*TRADE
Australia (which also serves New Zealand), E*TRADE Canada, E*TRADE Denmark, E*TRADE Japan KK, E*TRADE Korea,
E*TRADE Norway, E*TRADE South Africa, E*TRADE Sweden, and E*TRADE U.K. Moreover, E*TRADE has institutional offices
in ten countries with trading capabilities in 38markets.
Products and Services
Our global retail subsidiaries offer a variety of products and services including online stock and options trading as well as
comprehensive market information provided by Reuters, Big Charts and local news vendors. In some cases, subsidiaries offer mutual
funds, access to IPOs, and banking capabilities. During fiscal 2001, we intend to upgrade and improve the products and services we
offer to clients through our international subsidiaries. A primary focus will continue to be rolling out cross-border trading, enabling
foreign retail investors to have affordable access to U.S. equities online in real-time, and enabling U.S. retail investors to access
several large overseas markets.
We are also developing a Web-based product that will offer institutional clients an online trading and administration solution. The
platform, which we expect to launch in the second quarter of fiscal 2001, will provide institutional customers with direct access to
international exchanges and basket trading. Moreover, the platform will offer our institutional clients real-time, online access to
statements and electronic settlement capabilities.
Customers and Markets
As the sophistication of investors around the globe grows, our intention is to provide our investors with the content and tools to enable
trading in multi-markets and multi-products from a single-access electronic gateway. On the retail side, our focus during fiscal 2001
will be to enable U.S. retail investors to access several large overseas markets through the development of a global cross-border
trading network. We anticipate providing such access to foreign markets to all other customers around the globe, including providing
overseas customers with access to U.S. markets, including our proprietary products. For our institutional customers, we are developing
a fully-electronic network to allow more efficient access to global exchanges (as discussed above in Products and Services).
Operations
Clearing
The institutional side of our business currently outsources the majority of the clearing of its transactions to third parties around the
world. During fiscal 2001, we intend to explore extending the self-clearing operations within the domestic retail business to our
institutional business to take advantage of the efficiencies of self-clearing. In addition, we expect to gain further efficiencies from
cross-border retail trading, where we anticipate that operations in each country will leverage the self-clearing infrastructures of
operations in other countries that have a retail client base.
Lending and Borrowing Activities
Margin Lending. As in our domestic retail operations, we make loans to customers collateralized by customer securities in other
markets around the world. In the U.S., margin lending by E*TRADE Securities is subject to the
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margin rules of the Board of Governors of the Federal Reserve System, NASDR margin requirements and our internal policies, which
are more stringent than the Federal Reserve and NASDR requirements. In overseas markets the rules regarding margin lending vary
significantly and are generally not as well defined as the rules within the U.S. We intend to adopt internal rules similar to those
followed in the U.S. where those rules are more stringent than local rules. By permitting customers to purchase securities on margin,
we take the risk of a market decline that could reduce the value of the collateral held by us to below the customers’ indebtedness
before the collateral can be sold, which could result in losses to us. Under applicable overseas regulatory rules, in the event of a
decline in the market value of the securities in a margin account, we are generally obligated to require the customer to deposit
2002. EDGAR Online, Inc.