eTrade 2002 Annual Report Download - page 8

Table of Contents
Index to Financial Statements
DOMESTIC RETAIL BROKERAGE
Our Domestic Retail Brokerage business is primarily comprised of the activities of E*TRADE Securities, LLC (“E*TRADE Securities”), an
SEC registered broker-dealer, its securities clearing firm, E*TRADE Clearing LLC (“E*TRADE Clearing”) a member of the New York Stock
Exchange (“NYSE”), Dempsey & Company, LLC, (“Dempsey”) a specialist and market-making firm and E*TRADE Professional Trading,
LLC (“E*TRADE Professional Trading”), a direct access brokerage firm for active online traders. E*TRADE completed its acquisitions of
Dempsey and E*TRADE Professional Trading in fiscal 2001 and fiscal 2002, respectively.
Products and Services. Domestic Retail Brokerage services are based upon proprietary transaction-enabling technology and are designed to
serve the needs of self-directed investors. Our services include: fully-automated stock, option, fixed income and mutual fund order processing;
online investment portfolio tracking; and providing financial market news and information. We offer our services to customers 24 hours a day,
seven days a week through the Internet, automated telephone service, Internet-enabled wireless devices, direct modem access and live telephone
representatives.
Customers can access us in person at any one of our E*TRADE Financial Centers or E*TRADE Financial Zones for help in opening a new
account or guidance with an existing account. E*TRADE Financial Centers in New York City, San Francisco, Beverly Hills, Boston and
Denver offer personal access to our team of licensed relationship specialists. The Centers offer a full suite of services for investors to open an
account and review available products. Existing customers can use self service kiosks to access their accounts, make deposits to brokerage
accounts, place trades or use our ATMs. E*TRADE Financial Zones are located in Super Target stores and offer ATM access to customers and
certain brokerage services. Customers can also speak with a relationship specialist to receive help with their accounts, make deposits to
brokerage accounts and learn about our full line of products and services.
Market-Making Activities. Market-making activities in listed and over-the-counter issues are conducted by Dempsey, a Chicago Stock
Exchange specialist. A specialist is a broker-dealer authorized by an exchange to be a party through which all trading on the floor of the
exchange is transacted. Trading gains and losses result from these activities. While a significant portion of security trades originated by the
clients of E*TRADE Securities are directed to Dempsey, a large percentage of Dempsey’ s trading volume comes from parties other than
E*TRADE Securities. Dempsey is also a member of the Boston Stock Exchange and the Cincinnati Stock Exchange. A wholly-owned Dempsey
subsidiary is a market maker in the National Market System (“Nasdaq”) and bulletin board securities. Dempsey is also a clearing member of the
National Securities Clearing Corporation. GVR Company, LLC (“GVR”) is a wholly-owned subsidiary of Dempsey. GVR is a broker-dealer
registered with the SEC, a member of the NASD, and a clearing member of the National Securities Clearing Corporation. GVR operates as a
market-maker in over-the-counter equity securities, primarily those traded on the Nasdaq and on the OTC Bulletin Board.
Clearing Operations. Clearing operations include the confirmation, receipt, settlement, custody and delivery functions involved in securities
transactions. Performing our own clearing operations allows E*TRADE Clearing to retain customer free credit balances and securities for use
in margin lending activities subject to Regulation T and the New York Stock Exchange Rule 431. E*TRADE Clearing has an agreement with
BETA Systems, through January 2006, 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.
On August 30, 2002, E*TRADE Securities, Incorporated was reorganized and renamed E*TRADE Securities, LLC. Also, on September 3,
2002, E*TRADE Clearing LLC became the clearing firm for E*TRADE Securities. E*TRADE Clearing (formerly E*TRADE Institutional
Securities, Inc.) is a wholly-owned indirect subsidiary of the Company. In connection with the above, all cash balances and security positions in
customer accounts previously maintained by E*TRADE Securities and associated liabilities were transferred to E*TRADE
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2003. EDGAR Online, Inc.