eTrade 2005 Annual Report Download - page 100

Table of Contents
Equity Security Risk
Equity securities risk is the risk of potential loss from investing in public and private equity securities. We hold equity securities for
investment purposes and in trading securities for market-making purposes. For investment purposes, we currently hold publicly traded
equity securities, in which we had unrealized gains of $94.7 million as of December31, 2005. As each security’s market price fluctuates,
we are exposed to risk of a loss with respect to these unrealized gains. Our investments in Softbank Investment Corporation (“SBI”)
and Investmart also expose us to foreign currency exchange risk. These investments are less than 1% of total assets as of December31,
2005.
Trading Securities
We hold $146.7 million and $593.2 million in trading securities as of December31, 2005 and 2004. Trading securities unlike most of our
assets are marked-to-market through earnings. For liquidity purposes at the Bank level, we maintain a trading portfolio of
investment-grade securities. At December31, 2005 and December31, 2004, the non-equity trading portfolio has fair values of $125
million and $567million, respectively.
In addition, we make a market in certain equity securities. We held as trading for market-making purposes, a fair value of $20.2 million
and $8.3 million as of December31, 2005 and 2004, respectively. Our market-making activities are primarily in certain exchange-traded
and over-the-counter securities on the CHX. The market risk from this business is monitored by the Asset Liability Committee who has
established specific guidelines for an acceptable level of risk.
63

2006. EDGAR Online, Inc.