eTrade 2005 Annual Report Download - page 46

Table of Contents
2004. Our retail customers are divided into three categories: Active Trader, Mass Affluent and Main Street Investor. Each segment
receives product pricing based on its service usage level, with Active Traders receiving the most favorable pricing. During 2005,
growth in Active Trader and Mass Affluent customer trading volumes outweighed Main Street Investor trading volumes, contributing
to our lower average commission per trade.
Due to the factors described above, our growth in DARTs by 17% has equated to only a 3% increase in retail commissions revenue
during 2005; however, our business model derives revenue from not only trades but the full relationship with the customer, especially
customers who deposit cash with us. Our average customer purchases at least 2 products or services from our suite of retail products.
So while retail commissions increased 3% during 2005, total revenue increased 15%.
Institutional commissions increased to $119.2 million in 2005 from $102.7 million in 2004. The increase reflects growth in wholesale
trading. In early 2005, an institutional wholesale trading group was created to trade large blocks of stock for institutional customers.
We provide institutional customers with global trading and settlement services, as well as worldwide access to research provided by
third parties, in exchange for commissions based on negotiated rates, which differ by customer.
Principal Transactions
Principal transactions decreased 22% in 2005 compared to 2004. Principal transactions decreased due to lower market-making volumes
and market volatility. Principal transactions primarily consist of revenues from market-making. As such, our principal transactions
revenues are influenced by overall trading volumes, the number of stocks for which we act as a market maker, the trading volumes of
those specific stocks and the trading performance of our proprietary trading activities.
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2006. EDGAR Online, Inc.