eTrade 2004 Annual Report Download - page 9

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Table of Contents
Index to Financial Statements
2004, we primarily segmented our domestic retail customers and offered them pricing programs on equity trades as follows:
We also execute trades for customers of E*TRADE Professional Trading, LLC. The commission is primarily determined on a per share
basis and is a negotiated amount with the traders. On a per trade basis, the average commission is less than that charged to the Active Trader
segment and generally ranges from $1.50 to $1.75 per trade.
Over the past three years, commission revenues have represented approximately 23% of total net revenues. Trades by Active Traders
represent approximately half of our retail trades and approximately one-
third of our total trades. We analyze our commission revenues based on
Daily Average Revenue Trades (“DART”s) and average commission per trade.
We recently announced a refined customer segmentation model that included new pricing, lowered segment qualification criteria and
service enhancements for our three primary retail customer segments. These retail customer segments are now defined as follows:
In addition, the changes lowered per contract fees on option trades to as low as $0.75 for qualifying Active Traders from a previous range
of $1.25 to $1.50, depending on activity levels.
We provide institutional customers with online brokerage services, including direct access to international exchanges through a web-
based platform. The platform also offers real-time, online access to statements and electronic settlement capabilities. In addition, we provide
our customers worldwide access to research provided by third parties. Institutional customers may use a portion of the commissions that they
generate in trading securities to pay for the research services. We track the commissions that a customer has generated and the corresponding
research credits awarded through a proprietary system. Pricing for institutional trading is individually negotiated and is frequently variable
depending on market conditions. Consequently, we report revenues for this trading as principal transactions in the consolidated statement of
operations.
We conduct market-making activities in listed and over-the-counter issues through ETCM-ES, a Chicago Stock Exchange specialist. A
specialist is a broker-dealer authorized by an exchange to be a party through which
4
Customer Segment
Segmentation Criteria in 2004
Base Commission Pricing in 2004
Active Trader
27 trades or more per quarter
$9.99 per trade
Serious Investor
15-
26 trades per quarter or $50,000 or more in
assets in combined retail accounts
$12.99 per trade
Main Street Investor
Less than 15 trades per quarter and less than
$50,000 in assets in combined retail accounts
$19.99 commission + $3.00 order handling
fee per trade
Customer Segment
Segmentation Criteria in 2005
Base Commission Pricing in 2005
Active Trader
15 trades or more per quarter
$6.99 per trade
Serious Investor
9-14 trades per quarter or $50,000 or more in
assets in combined retail accounts
$11.99 per trade
Main Street Investor
Less than 9 trades per quarter and less than
$50,000 in assets in combined retail accounts
$14.99 per trade