eTrade 2012 Annual Report Download - page 165

The Company excluded the following shares from the calculations of diluted earnings (loss) per share for
the years ended December 31, 2012, 2011 and 2010 as the effect would have been anti-dilutive (shares in
millions):
Year Ended
December 31,
2012 2011 2010
Weighted-average shares excluded as a result of the Company’s net loss:
Convertible debentures 4.1 N/A 77.2
Stock options and restricted stock awards and units 0.4 N/A 0.8
Other stock options and restricted stock awards and units 2.5 3.7 2.8
Total 7.0 3.7 80.8
NOTE 17—REGULATORY REQUIREMENTS
Registered Broker-Dealers
The Company’s largest U.S. broker-dealer subsidiaries are subject to the Uniform Net Capital Rule (the
“Rule”) under the Securities Exchange Act of 1934 administered by the SEC and FINRA, which requires the
maintenance of minimum net capital. The minimum net capital requirements can be met under either the
Aggregate Indebtedness method or the Alternative method. Under the Aggregate Indebtedness method, a broker-
dealer is required to maintain minimum net capital of the greater of 6
2
⁄ 3 % of its aggregate indebtedness, as
defined, or a minimum dollar amount. Under the Alternative method, a broker-dealer is required to maintain net
capital equal to the greater of $250,000 or 2% of aggregate debit balances arising from customer transactions.
The method used depends on the individual U.S. broker-dealer subsidiary. The Company’s other broker-dealers,
including its international broker-dealer subsidiaries located in Europe and Asia, are subject to capital
requirements determined by their respective regulators.
As of December 31, 2012 and 2011, all of the Company’s broker-dealer subsidiaries met minimum net
capital requirements. Total required net capital was $0.1 billion at both December 31, 2012 and 2011. In
addition, the Company’s broker-dealer subsidiaries had excess net capital of $0.7 billion at both December 31,
2012 and 2011. The tables below summarize the minimum excess capital requirements for the Company’s
broker-dealer subsidiaries at December 31, 2012 and 2011 (dollars in thousands):
Required Net
Capital Net Capital
Excess Net
Capital
December 31, 2012:
E*TRADE Clearing LLC(1) $123,656 $658,968 $ 535,312
E*TRADE Securities LLC(1) 250 79,318 79,068
G1 Execution Services, LLC(2) 1,283 10,598 9,315
Other broker-dealers 4,639 36,070 31,431
Total $129,828 $784,954 $ 655,126
December 31, 2011:
E*TRADE Clearing LLC(1) $104,804 $587,819 $ 483,015
E*TRADE Securities LLC(1) 250 145,423 145,173
G1 Execution Services, LLC(2) 1,000 24,921 23,921
Other broker-dealers 9,183 32,157 22,974
Total $115,237 $790,320 $ 675,083
(1) Elected to use the Alternative method to compute net capital.
(2) Elected to use the Aggregate Indebtedness method to compute net capital.
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