eTrade 2003 Annual Report Download - page 9

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Table of Contents
Index to Financial Statements
activities. E*TRADE Clearing has an agreement with BETA Systems, through January 2006, for the provision of computer services to support
order entry, order routing, securities processing, customer statement preparation, tax reporting, regulatory reporting and other services
upon completion of certain contract milestones. We anticipate transitioning to ADP (terminating our agreement with Beta Systems) during
2004. We outsource clearing of all international institutional transactions with the exception of the Japanese, Hong Kong, Singapore and Thai
markets.
Securities Lending and Borrowing. We borrow securities both to cover customer short sales and to complete customer transactions in
with the lender and receive a rebate (in the case of cash collateral) or pay a fee calculated to yield a negotiated rate of return. When lending
lending and borrowing transactions are generally conducted pursuant to written and/or oral agreements with counterparties requiring that the
securities borrowed be “marked-to-market” on a daily basis through the facilities of the various national clearing organizations.
Proprietary Trading. Proprietary trading activities involve employing registered proprietary traders. Proprietary traders at E*TRADE
Professional trade with the Company’s capital, which consist of E*TRADE Professional’s members’ capital and retained profits. Traders are
assigned buying power based upon their trading experience and performance, trading strategy and relationship with E*TRADE Professional’s
clearing firm. Trading gains and losses result from these activities.
BANKING
We offer retail banking products and services through E*TRADE Bank (the “Bank”), which is the nation’s sixth largest Office of Thrift
Supervision (“OTS”) regulated financial institution, based on total assets at September 30, 2003. Our branchless structure permits us to serve
customers nationwide. Besides the Bank, our Banking Segment includes four subsidiaries: E*TRADE Mortgage Corporation (“E*TRADE
Mortgage”), a direct-to-consumer mortgage loan originator; E*TRADE Consumer Finance Corporation (“E*TRADE Consumer Finance”),
formerly Ganis Credit Corporation, an originator of recreational vehicle (“RV”), marine and other consumer loans; E*TRADE Global Asset
Management, Inc. (“ETGAM”), a registered broker-
dealer and investment advisor that manages asset portfolios for the Banking and Brokerage
Segments; and E*TRADE Access, Inc. (“E*TRADE Access”), which operates an independent network of ATMs in the United States and
Canada.
Products and Services. The Bank offers a full suite of consumer banking products and services. We offer interest-earning checking
pending investment) and certificates of deposit. We offer residential mortgage loans, home equity loans and home equity lines of credit
(“HELOC”). We also offer credit card, automobile, RV, marine and other consumer loans. We offer our services to customers 24 hours a day,
seven days a week through the Internet, automated telephone service, Internet-enabled wireless devices and direct modem access. See further
discussion of our Banking activities in “Required Financial Data.”
COMPETITION
The electronic financial services market, over the Internet and other alternative 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 beyond online
brokerage firms, online brokerage firms, Internet banks, mortgage companies and traditional “brick & mortar” retail banks and thrifts. These
competitors also provide touchtone telephone, voice response and online banking services,
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