eTrade 2004 Annual Report Download - page 121

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Table of Contents
Index to Financial Statements
The following options to purchase shares of common stock have not been included in the computation of diluted income (loss) per share
because the options’ exercise price was greater than the average market price of the Company’s common stock for the following years stated,
therefore, the effect would be anti-dilutive (in thousands, except exercise price ranges):
NOTE 24—REGULATORY REQUIREMENTS
Registered Broker-Dealers
Year Ended December 31,
2004
2003
2002
Options excluded from computation of diluted income (loss) per share
10,665
14,860
26,936
Exercise price ranges:
High
$
58.19
$
58.19
$
58.19
Low
$
12.50
$
7.97
$
6.41
The Company’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, the New York Stock Exchange (“NYSE”), the Chicago Stock Exchange (“CHX”), the Philadelphia Stock
Exchange (“PHLX”) and the NASD Inc. (“NASD”), which requires the maintenance of minimum net capital. E*TRADE Securities,
E*TRADE Clearing and E*TRADE Professional Trading have elected to use the alternative method to compute net capital permitted by the
Rule, which requires that E*TRADE Securities, E*TRADE Clearing and E*TRADE Professional Trading maintain minimum net capital equal
to the greater of $250,000 or two percent of aggregate debit balances arising from customer transactions, as defined.
Under the alternative method, a broker-dealer may not repay subordinated borrowings, pay cash dividends or make any unsecured
advances or loans to its parent or employees if such payment would result in net capital of less than 5% of aggregate debit balances or less than
120% of its minimum dollar amount requirement.
The table below summarizes the minimum capital requirements for the Company’s broker-dealer subsidiaries (in thousands):
Banking
December 31, 2004
Required Net
Capital
Net
Capital
Excess Net
Capital
E*TRADE Securities LLC
$
250
$
47,663
$
47,413
E*TRADE Clearing LLC
48,391
303,070
254,679
E*TRADE Capital Markets
-
Execution Services
290
7,061
6,771
GVR Company, LLC
1,000
42,488
41,488
Engelman Securities, Inc.
242
2,418
2,176
E*TRADE Professional Trading, LLC
250
2,969
2,719
E*TRADE Professional Securities, LLC
1,123
5,522
4,399
Versus Brokerage Service (U.S.) Inc.
100
674
574
E*TRADE Global Asset Management, Inc.
819
21,388
20,569
International broker
-
dealers
33,434
73,267
39,833
Totals
$
85,899
$
506,520
$
420,621
The Bank is subject to various regulatory capital requirements administered by the Federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the
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