eTrade 2004 Annual Report Download - page 12

Download and view the complete annual report

Please find page 12 of the 2004 eTrade annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 150

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150

Table of Contents
Index to Financial Statements
COMPETITION
The electronic financial services market, over the Internet and other distribution channels, continues to evolve rapidly and is intensely
competitive. We do not expect this environment to change in the future. As we continue to diversify and expand our services, we expect the
number of our competitors to increase. We are in direct competition with full commission brokerage firms, discount brokerage firms, online
brokerage firms, Internet banks, market-making firms, mortgage companies and traditional “brick & mortar” retail banks and thrifts. These
competitors also provide touchtone telephone, voice response and online banking services, electronic bill payment services and a host of other
financial products.
For purposes of assessing the Company’s competitive position, management tracks the number of our DARTs relative to those reported
by the six major online brokers that we consider our principal competitors. Based on this analysis, we ranked third in the number of DARTs
reported for the years ended December 31, 2004 and 2003.
Many of our competitors have longer operating histories and greater resources than we do and offer a wider range of financial products
and services. Many also have greater name recognition, greater market acceptance and larger customer bases. These competitors may conduct
extensive promotional activities and offer better terms, lower prices and/or different products and services than we do. Moreover, some of our
competitors have established relationships among themselves or with third parties to enhance their products and services. This means that our
competitors may be able to respond more quickly to new or changing opportunities and demands and withstand changing market conditions
better than we can.
INTERNATIONAL OPERATIONS
E*TRADE Financial Corporation offers its services in international markets directly through its website at www.etrade.com as well as
through additional branded retail brokerage websites in Canada, Denmark, Germany, Hong Kong, Iceland, Sweden and the United Kingdom.
The Company also has minority equity investments in companies that license the E*TRADE brand and operate websites in Australia, Japan
and Korea. Our reported performance metrics, including DARTs, do not include operating information from these licensees. The Company’s
total net U.S. revenues, which it determines based on the geographic location of the legal entity in which the revenue was earned, were $1.36
billion in 2004, $1.32 billion in 2003 and $1.19 billion in 2002. The Company’s total net non-U.S. revenues were $0.17 billion in 2004, $0.12
billion in 2003 and $0.10 billion in 2002. No individual foreign country accounted for more than 10% of revenues in any of these years.
REGULATION
Our business is subject to stringent regulation by U.S. Federal and state regulatory agencies and securities exchanges and by various non-
U.S. governmental agencies or regulatory bodies, securities exchanges and central banks, each of which has been charged with the protection of
the financial markets and the protection of the interests of those participating in those markets. These regulatory agencies in the United States
include, among others, the Securities and Exchange Commission (“SEC”), the NASD, Inc. (“NASD”), the New York Stock Exchange
(“NYSE”), the FDIC, the Municipal Securities Rulemaking Board and the Office of Thrift Supervision (“OTS”). We are also subject to
extensive regulation outside of the United States. Additional legislation, regulations and rulemaking may directly affect our manner of
operation and profitability.
Our broker-dealers are registered with the SEC and are subject to regulation by the SEC and by self-regulatory organizations, such as the
NYSE, NASD and the securities exchanges of which each is a member.
E*TRADE Asset Management, Inc. and E*TRADE Securities act as investment advisers and principal underwriters and distributors,
respectively, of E*TRADE Funds. E*TRADE Funds is a registered management investment company regulated under the Investment
Company Act of 1940.
7