eTrade 2004 Annual Report Download - page 39

Table of Contents
Index to Financial Statements
The components of other brokerage-related revenues and percentage change information were as follows (dollars in thousands):
The decrease in other brokerage-related revenues from 2003 to 2004 is primarily due to decreases in account maintenance fees,
proprietary fund revenues and electronic communication network (“ECN”) rebate fees, partially offset by increased payments for order flow
and FX margin revenue. The increases in other brokerage-related revenues from 2002 to 2003 are primarily due to increase in proprietary fund
revenues, ECN rebate fees, partially offset by decreases in account maintenance fees and payments for order flow.
Variance
Year Ended December 31, 2004 vs. 2003 2003 vs. 2002
2004 2003 2002 $ Amount % $ Amount %
Other brokerage
-
related:
Account maintenance fees
$
43,345
$
55,757
$
66,394
$
(12,412
)
(22
)%
$
(10,637
)
(16
)%
Stock plan administration
23,774
24,401
25,530
(627
)
(3
)%
(1,129
)
(4
)%
Payments for order flow
17,397
11,356
13,992
6,041
53
%
(2,636
)
(19
)%
Proprietary fund revenues
11,013
18,158
9,222
(7,145
)
(39
)%
8,936
97
%
FX margin revenue
9,950
7,059
3,874
2,891
41
%
3,185
82
%
ECN rebate fees
8,815
12,475
6,966
(3,660
)
(29
)%
5,509
79
%
Other
49,392
48,476
48,285
916
2
%
191
—
%
Total other brokerage
-
related
$
163,686
$
177,682
$
174,263
$
(13,996
)
(8
)%
$
3,419
2
%
•
Account maintenance fees are charged to customers’ accounts when they fall below specified balance and/or activity levels. The
decrease in account maintenance fees from 2002 to 2004 was primarily due to a decrease in the number of accounts that were charged
as customers either met the specified balance and/or activity levels, closed their accounts or had their account value taken to $0 as a
result of the account maintenance fee.
•
Stock plan administration revenues result from our providing corporate customers with full-service assistance and software to manage
their employee stock benefit plans. The fluctuations in these revenues are a function of activity with customers, which has remained
fairly constant over the past three years.
•
The increase in payments for order flow from 2003 to 2004 was primarily due to the overall increase in trades and an increase in order
flow received on option trades. The decrease in payments for order flow from 2002 to 2003 was partially attributable to the
challenging environment that the listed market makers and specialists were operating under, which in turn, resulted in overall
reductions in payments for order flow.
•
Proprietary fund revenues represents a portion of the fees earned on customer balances held in money market funds. These revenues
decreased from 2003 to 2004 due to a decrease in customer average money market fund balances as customers moved funds to our
SDA product. In October 2002, the Company began managing more funds on its own versus putting its customers’ money in an
outside managed fund receiving management fees on these funds in lieu of interest. This change was the primary reason for the
increase from 2002 to 2003.
•
FX, or foreign exchange, margin revenue has increased over the past three years primarily related to the increased activity in employee
stock plans for our E*TRADE Corporate Services customers
’
international employees.
•
ECN rebate fees represent rebates received for providing liquidity on ECNs. Liquidity is generally added to an ECN when orders are
placed outside the current bid/ask price range for a particular security. ECN rebate fees decreased from 2003 to 2004 due to a decrease
in shares executed which was due to a less volatile securities market. ECN rebate fees increased from 2002 to 2003, as a result of our
acquisition of E*TRADE Professional in June 2002, which generates significant ECN rebate fees.
33
•
Other revenues comprise various brokerage-related service charges and fees charged to brokerage customers.