eTrade 2004 Annual Report Download - page 8

Table of Contents
Index to Financial Statements
As of December 31, 2004, we had approximately 3.0 million active brokerage accounts and 0.6 million active banking accounts. We
consider a brokerage account “active”
if the account has an asset balance of at least $25 at the end of the quarter, if a trade has been made in the
account in the past six months or if the account was opened in connection with a corporate employee stock benefit program. Bank deposit
accounts are considered “active” if the account was initially funded, remains open and is not considered abandoned or dormant under
applicable Federal and State laws. We do not count brokerage customers’ SDAs as active bank accounts. Bank loan accounts are considered
“active” if the Company holds the underlying obligations. Bank credit card accounts are considered “active” if the account has incurred a debit
or credit within the prior six months. As of December 31, 2004, approximately 44% of the bank’s customers were also brokerage customers.
In January 2005, we implemented an organizational realignment. To better focus on the needs of our customers for integrated financial
services solutions, we realigned our operations around our two primary customer segments—retail and institutional. As part of this
realignment, we implemented a new management structure responsible for retail and institutional operations, making a change from our prior
business operation alignment of brokerage and banking. Beginning in 2005, we plan to realign our external financial segment reporting around
the new retail and institutional business operations.
In February 2005, we also introduced E*TRADE Complete, an integrated financial services solution that will enable our customers to
manage all their trading, investing, banking and borrowing relationships in a consolidated manner. E*TRADE Complete helps customers
optimize cash and credit, by utilizing tools designed to inform them of whether or not they are receiving the most appropriate rates for their
cash and paying the most appropriate rates for credit. E*TRADE Complete is intended to lead to increased usage of our products and services,
which would lead to higher revenues and profit per account.
BROKERAGE
Products and Services
We offer a full suite of retail brokerage products and services based upon a proprietary transaction-enabling system that, among other
things, allows customers to place orders for equity, option, mutual fund and fixed income transactions and monitor their brokerage accounts.
Our transaction-enabling system is designed primarily to serve the needs of self-directed investors. Our retail brokerage products and services
include:
•
automated order placement and execution of market and limit equity, futures, options, exchange-traded funds and bond orders;
•
real-time streaming quotes, commentary and news;
•
advanced trading platforms for active traders;
•
personalized portfolio tracking;
•
access to nearly 5,000 non-proprietary and proprietary mutual funds;
•
FDIC-insured sweep deposit account;
•
quick transfer functionality that facilitates the transfer of funds to/from external accounts;
•
individual retirement accounts and college savings plan products; and
Trading and Investing
•
stock option plan administration products and services.
We earn commissions when customers execute trades. The level of a customer’s trading activity during a quarter or assets held in
combined retail accounts determine the commission that will be charged per trade. In
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