eTrade 2006 Annual Report Download - page 7

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banking and cash management back office system that will support our global initiatives around these key
products.
COMPETITION
The electronic financial services market, over the Internet and through other distribution channels, continues
to evolve rapidly. As we continue to diversify and expand our services, we expect competition to continue to
increase. Our retail segment competes with full commission brokerage firms, discount brokerage firms, online
brokerage firms, Internet banks, mortgage banking companies, non-financial service companies originating loans
and traditional “brick & mortar” retail banks and thrifts. Some of these competitors also provide Internet trading
and banking services, investment advisor services, touchtone telephone and voice response banking services,
electronic bill payment services and a host of other financial products. Our institutional segment, in addition to
the competitors above, competes with market-making firms, investment banking firms and other users of market
liquidity in its quest for the least expensive source of funding.
In offering our products and services, we face competition in the following areas:
• For investing and trading products, we compete with Internet-based firms and large traditional financial
institutions. The market for trading products continues to be highly competitive with both Internet-based
firms and large traditional financial institutions focused on growing their customer base.
• For banking products, we compete with Internet-based banks that traditionally have attractive rates, as
well as traditional financial institutions that rely primarily on branch networks to deliver products and
services. Deposit pricing continues to come under competitive pressure as banks seek to grow their
deposit base by offering appealing rates to attract customers to their businesses.
• For lending products, we compete with traditional banking institutions as well as consumer finance
companies and other non-bank lenders. Loan pricing and credit standards continue to come under
competitive pressure as lenders seek to grow their businesses in the face of declining home sales and
tightening credit spreads.
We believe we can continue to attract customers to our products and services in these areas through our
compelling combination of product, service and price. In addition, we believe our low cost infrastructure allows
us to deliver products priced competitively.
In our effort to attract quality employees, we encounter competition in some business lines and corporate
functions. Our ability to continue to compete effectively in our business will depend upon our ability to attract
new employees and retain existing employees.
Many of our competitors have longer operating histories and greater resources than we do and offer a wider
range of financial products and services. Many also have greater name recognition, greater market acceptance
and larger customer bases. These competitors may conduct extensive promotional activities and offer better
terms, lower prices and/or different products and services than we do. Moreover, some of our competitors have
established relationships among themselves or with third parties to enhance their products and services. Our
competitors may be able to respond more quickly to new or changing opportunities and demands and withstand
changing market conditions better than we can.
Management monitors actions by competitors by reviewing new product and service offerings, including the
competitive pricing of investing, trading, banking and lending products. Overall, we believe our ability to
compete successfully in the financial services industry is because of the value proposition created through our
unique combination of price, functionality and service.
PERFORMANCE MEASUREMENT
We assess the performance of our business based on our primary customer segments, retail and institutional.
Retail customers are offered an integrated product set including investing, trading, banking and lending products.
Our retail segment also includes providing corporate clients with employee stock plan administration and options
management tools. Institutional customers are offered access to a range of execution services through traditional
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