eTrade 2007 Annual Report Download - page 7

bulletin board securities, which are securities that are not listed on the NASDAQ Global Select Market
(“NASDAQ”) or a national securities exchange.
As a market maker, we take positions in securities and function as a wholesale trader by combining trading
lots to match buyers and sellers of securities. Trading gains and losses result from these activities. Our revenues
are influenced by overall trading volumes, the number of stocks for which we act as a market maker and the
trading volumes and volatility of those specific stocks.
We also transact large block trading activity on the New York Stock Exchange (“NYSE”) and NASDAQ
exchanges. In addition, we provide institutional customers with trade execution services, including direct access
to international exchanges. Our web-based platform offers real-time, online access to statements and electronic
settlement capabilities. We do not expect to continue to provide trade execution services in future periods as this
is no longer a key component of our business.
In addition to activities with external customers, the institutional segment includes the management of our
balance sheet. Balance sheet management functions focus on asset allocation and managing interest rate risk,
credit risk and liquidity risk. The retail segment team works in conjunction with the institutional team by
originating margin receivables and loans and by gathering retail deposits which are leveraged by the institutional
group to enhance overall net interest income.
For additional statistical information regarding products and customers, see Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) beginning on page 22.
Three years of segment financial performance and data can be found in MD&A beginning on page 39 and in
Note 24—Segment and Geographic Information.
CUSTOMER SERVICE
We believe providing superior customer service is fundamental to our business. During 2007, we
implemented an online service center where customers can request services on accounts and obtain quick
answers to frequently asked questions. Over the past two years, we have significantly increased the number of
customer service representatives and relationship managers in order to increase the quality of our service. We
have a total of 27 E*TRADE Financial Branches in the United States, which are available to retail customers for
any of their customer service needs.
TECHNOLOGY
We believe our focus on being a technological leader in the financial services industry enhances our
competitive position. This focus allows us to deploy a secure, scalable technology and back office platform that
promotes innovative product development and delivery. During 2007, we continued to enhance our product
offerings by launching the Global Trading Platform, which gives investors the ability to buy, sell and hold
foreign equities in local currencies. Our U.S. customers now have access to foreign stocks and currencies in six
major international markets: Canada, France, Germany, Hong Kong, Japan and the United Kingdom.
COMPETITION
The online financial services market continues to evolve rapidly and we expect competition to continue to
increase. Our retail segment competes with full commission brokerage firms, discount brokerage firms, online
brokerage firms, Internet banks, mortgage banking companies, non-financial service companies originating loans
and traditional “brick & mortar” retail banks and thrifts. Some of these competitors also provide Internet trading
and banking services, investment advisor services, touchtone telephone and voice response banking services,
electronic bill payment services and a host of other financial products. Our institutional segment, in addition to
the competitors above, competes with market-making firms, investment banking firms and other users of market
liquidity in its quest for the least expensive source of funding.
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