eTrade 2000 Annual Report Download - page 7

with the potential to offer our integrated wireless products and services to over 50 million wireless subscribers nationwide.
Our DSL program acknowledges the value of high-speed internet access, providing a premium service for our most active investors.
Power E*TRADE Basic customers (more than 30 transactions per quarter) receive free DSL installation and discounted service. Power
E*TRADE Platinum customers (more than 75 transactions per quarter) receive free installation and free monthly service. This
program is delivered via our partnership with SBC Communications.
Our OptionsEdge service launched in fiscal 2000. OptionsEdge establishes E*TRADE as a leader in the options arena, providing free
real-time options quotes to customers and members, most active options content, and powerful tools such as options chains and a
Black-Scholes calculator.
Customers and Markets
Current domestic retail brokerage customers will continue to be a key target in our marketing communications as they represent a
major opportunity for growing total assets and leveraging our cross-selling business strategy. We plan to expand our customer base
with the acquisition of online investors from competitive brokerages, investors with traditional brokerage relationships, and new
investors who are just beginning to build their financial future. We believe that a common goal of our customers is to take personal
control of their finances and leverage timely ideas, insights and information to build wealth.
The domestic retail brokerage business plans to utilize the strength of its marketing partnerships, online and offline alliances and a
sophisticated prospecting approach to identify, reach and convert new customers. The primary focus of these efforts will be on
high-value investors, active traders and investors who have a strong affinity with one of our marketing partners.
Operations
Clearing
Clearing operations include the confirmation, receipt, settlement, custody and delivery functions involved in securities transactions.
Performing our own clearing operations allows E*TRADE Securities to retain customer free credit balances and securities for use in
margin lending activities subject to Securities and Exchange Commission (“SEC”) and National Association of Securities Dealers
Regulation, Inc. (“NASDR”) rules. E*TRADE Securities has an agreement with BETA Systems through July 2003, for the provision
of computer services to support order entry, order routing, securities processing, customer statement preparation, tax reporting,
regulatory reporting, and other services necessary to manage a brokerage clearing business.
As a self-clearing brokerage, customers' securities typically are held in nominee name on deposit at one or more of the recognized
securities industry depository trust companies, to facilitate ready transferability. We collect dividends and interest on securities held in
nominee name and make the appropriate credits to customer accounts. We also facilitate exercise of subscription rights on securities
held for our customers. We arrange for the transmittal of proxy, annual report and tender offer materials to customers. E*TRADE
Securities relies on certificate counts and microfilming procedures as deterrents to theft of securities and, as required by the NASDR
and certain other regulatory authorities, carries fidelity bonds covering loss or theft.
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Lending and Borrowing Activities
Margin Lending. We make loans to customers that are collateralized by customer securities. Our margin lending is subject to the
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 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 NASDR 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 additional securities or cash in
the account so that, at all times, the customer’ s equity in the account is at least 25% of the value of the securities in the account. Our
current internal requirement, however, is that the customer’ s equity not fall below 30%. In the event a customer’ s equity falls below
30%, the customer will be required to increase the account’ s equity to 35%. Margin lending to customers constitutes the major portion
of the basis on which our net capital requirements are determined under the SEC’ s Net Capital Rule. To the extent these activities
expand, our net capital requirements will increase. See “Item 7. Risk factors—We may be fined or forced out of business if we do not
maintain the net capital levels required by regulators’ ’ and ‘‘Item 7. Risk factors—As a significant portion of our revenues come from
2002. EDGAR Online, Inc.