eTrade 2007 Annual Report Download - page 39

Commission
Retail and institutional commission revenue increased 36% to $625.3 million for 2006 compared to 2005.
The primary factors that affect our commission revenue are DARTs and average commission per trade, which is
impacted by both trade types and the mix between our domestic and international businesses. Each business has a
different pricing structure, unique to its customer base and local market practices, and as a result, a change in the
relative numbers of executed trades in these businesses impacts average commission per trade. Each business
also has different trade types (e.g. equities, options, fixed income, ETFs, CFDs and mutual funds) that can have
different commission rates. As a result, changes in the mix of trade types within either of these businesses may
impact average commission per trade.
DARTs increased 63% to 159,348 for 2006 compared to 2005. Our U.S. DART volume increased 65% from
2005, driven by both our acquisitions of BrownCo and Harrisdirect as well as organic customer growth and
engagement. Our international DARTs grew by 53% compared to 2005, driven entirely by organic growth. In
addition, option-related DARTs further increased as a percentage of total U.S. DARTs and represented 13% of
trading volume versus 10% in 2005.
Average commission per trade decreased 13% to $12.05 for 2006 compared to 2005. The decrease was
primarily a function of the mix of customers. Main Street Investors, who generally have a higher commission per
trade, traded less during 2006 compared to 2005 which resulted in a heavier weighting of Active Traders, who
generally have a lower commission per trade.
Fees and Service Charges
Fees and service charges increased 22% to $238.8 million for 2006 compared to the 2005. The increase in
service charges and fees for 2006 was due primarily to an increase in the advisory service fee income and higher
payment for order flow from improved option and equity trading volumes. This increase was offset by a decrease
in account maintenance fees as our retail customers became more engaged and a greater number of customers
exceeded the minimum activity levels required to avoid account maintenance fees.
Principal Transactions
Principal transactions increased 11% to $110.2 million for 2006 compared to 2005. The increase in principal
transactions resulted from higher trading volumes and market volatility which were offset slightly by a decrease
in the average revenue earned per trade. Our principal transactions revenue is 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 performance of our proprietary trading activities.
Gain on Loans and Securities, Net
Gain on loans and securities, net decreased 43% to $56.0 million for 2006 compared to 2005. The decline in
the total gain on loans and securities, net during 2006 was due primarily to our lower sales of mortgage and
consumer loans compared to 2005. We retained a greater number of originated mortgage loans on the balance
sheet in an effort to retain the customer relationship and drive growth in net operating interest income. The
decline in gain on sales of consumer loans was also due in part to the sale of our consumer finance business in
2005. The increase in gain on sales of securities, net resulted from higher security sales volumes in 2006
compared to 2005.
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