E*Trade

E*Trade. It is a pioneering American financial services company specializing in online brokerage and banking. Founded in the early 1980s, it revolutionized the retail investing landscape by popularizing discount brokerage services via electronic platforms. The company is now a subsidiary of Morgan Stanley, operating as a key component of its Wealth Management division.

History

The company was founded in 1982 by William A. Porter and Bernard A. Newcomb as TradePlus, initially providing back-office services for other broker-dealers. In 1991, it launched its first electronic trading service for Charles Schwab, a major milestone in financial technology. The following year, the firm was renamed and began offering its services directly to consumers through America Online and CompuServe, early giants of the internet. Its initial public offering on NASDAQ in 1996 coincided with the dot-com bubble, fueling rapid growth. Key acquisitions over the years included Telebank in 2000, which added online banking, and Harrisdirect in 2005. During the financial crisis of 2007–2008, it was significantly impacted by losses in its mortgage-backed securities portfolio but survived without taking funds from the Troubled Asset Relief Program. In 2020, it was acquired by Morgan Stanley in a deal valued at approximately $13 billion, marking the end of its run as an independent public company.

Products and services

The core offering is its online trading platform for stocks, options, futures, and exchange-traded funds (ETFs). It provides extensive tools for technical analysis and market research, integrating data from sources like Morningstar and Standard & Poor's. Through its banking arm, it offers services such as checking accounts, savings accounts, and debit cards. The company also provides automated investment management through its robo-advisor platform and offers margin lending and cash management services. For advanced traders, it supports algorithmic trading strategies and provides access to initial public offerings. Its educational resources and thinkorswim platform, acquired from TD Ameritrade, are highly regarded in the retail investing community.

Business model and financial performance

Its primary revenue streams are interest income from customer margin loans and cash balances, and commissions from trade execution, though the industry shift to zero-commission trading pressured this latter segment. Additional revenue comes from payment for order flow, a common practice among online brokerages, and fees for banking products. As a publicly traded company on NASDAQ, its financial performance was closely watched; for instance, it reported strong growth in net income and dollar-based retention in the years leading to its acquisition. The integration into Morgan Stanley aimed to create synergies within the Wealth Management division, leveraging a massive client base and assets under management. The competitive landscape includes rivals like Charles Schwab, Fidelity Investments, and Interactive Brokers.

Corporate affairs

Its corporate headquarters are located in Arlington, Virginia, with other major offices in Jersey City, New Jersey and Alpharetta, Georgia. Following the acquisition, its operations were merged into the Institutional Securities and Wealth Management divisions of Morgan Stanley. The company was known for its distinctive and often humorous advertising campaigns, particularly during the Super Bowl, which featured a talking baby and later the E*Trade Baby series. It has been involved in various philanthropic initiatives, often focusing on financial literacy. Key leadership has included executives from both its independent history and, post-acquisition, from within the senior management of Morgan Stanley.

Regulatory and legal issues

As a registered broker-dealer and bank holding company, it was subject to oversight by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). It faced regulatory actions, including a 2003 settlement with the SEC and various state regulators over allegations of improper proprietary trading and conflict of interest issues. The company also settled charges related to its email retention practices. During the financial crisis, its exposure to collateralized debt obligations and home equity loans drew scrutiny. More recently, like its peers, it navigated the regulatory implications of the GameStop short squeeze and the industry-wide move to zero-commission trading, which attracted attention from legislators and the SEC.

Category:Financial services companies of the United States Category:Online brokerage firms Category:Companies based in Arlington, Virginia Category:Morgan Stanley