eTrade 2003 Annual Report Download - page 35

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Table of Contents
Index to Financial Statements
The following table sets forth the components of both gross and net revenues for our Brokerage Segment and percentage change
information for the periods indicated (dollars in thousands):
Other key criteria that we use to measure the performance of our Brokerage Segment and explain the results of our Brokerage operations
are presented in the following table:
We earn Brokerage commissions when customers execute trades. These commissions are primarily affected by brokerage revenue trade
volume, average commission per brokerage revenue trade and trade mix. Total brokerage revenue trades increased from 2002 to 2003 and
remained relatively flat from 2001 to 2002, because of general economic conditions and a resurgence in market activity during 2003. The
decreases in average commission per revenue trade were due primarily to the implementation of a simplified $9.99 flat commission rate
program in June 2002 for the active trader market, but were also due in part to changes in trade mix.
Principal transactions include institutional revenues, market-
making revenues and certain net proprietary trading gains. The 2003 increase
is due to resurgence in institutional and market-making activity. The increase in 2002 was due to the impact of a full year in 2002 of market-
making revenue from Dempsey.
Other brokerage-related revenues include account maintenance fees, payments for order flow from outside market makers, stock plan
administration products and services revenue, professional trading rebate revenues, proprietary fund revenues and fees for brokerage-related
services. The increases from 2001 to 2003 are primarily due to an increase in professional trading rebate revenues, following the acquisition of
E*TRADE Professional in June 2002, proprietary fund revenues and fees (in lieu of interest, which was previously recorded in brokerage
27
Year Ended December 31,
Percentage Change
2003
2002
2001
2003
Versus
2002
2002
Versus
2001
Brokerage revenues:
Commissions
$
337,468
$
294,791
$
377,704
14
%
(22
)%
Principal transactions
229,846
223,531
157,949
3
%
42
%
Other brokerage
-
related
177,682
174,263
156,690
2
%
11
%
Brokerage interest income
144,379
182,103
305,581
(21
)%
(40
)%
Brokerage interest expense
(10,305
)
(12,515
)
(86,489
)
(18
)%
(86
)%
Net brokerage revenues
$
879,070
$
862,173
$
911,435
2
%
(5
)%
December 31,
Percentage Change
2003
2002
2001
2003
versus
2002
2002
versus
2001
Total brokerage revenue trades(1)
29,814,930
21,866,047
21,942,944
36
%
—
%
Brokerage daily average revenue trades (
“
DARTs
”
)(
1)
119,260
87,464
89,018
36
%
(2
)%
Average commission per revenue trade
$
11.32
$
13.48
$
17.21
(16
)%
(22
)%
Average (dollars in millions):
Customer margin balances
$
1,225
$
1,250
$
2,092
(2
)%
(40
)%
Customer money market fund balances
$
7,536
$
7,743
$
8,525
(3
)%
(9
)%
Stock borrow balances
$
366
$
317
$
1,270
15
%
(75
)%
Stock loan balances
$
675
$
441
$
1,761
53
%
(75
)%
Customer credit balances
$
2,134
$
1,471
$
1,568
45
%
(6
)%
(1) Total brokerage revenue trades and daily average revenue trades (“DARTs”) include domestic, international and professional revenue trades. DARTs differ from daily average
transactions, which we reported in the past, in that transactions include both revenue and non-revenue executions, while excluding professional and other commission-based revenue
trades. We believe DARTs offer a more comparable commission per trade measure.