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What Is E*Trade®?

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  • Written By: Carol Francois
  • Edited By: Bronwyn Harris
  • Last Modified Date: 02 October 2014
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E*Trade® is an American company that specializes in stock brokerage services via the Internet. Using this company, individuals can purchase securities without the use of a financial broker. A financial broker acts as an intermediary, taking funds from individuals and managing the investment portfolio for them. Stock brokerages sell stocks, bonds, mutual funds, and stock options. All these items are investment tools, used as a long-term method of increasing wealth.

William A. Porter formed E*Trade® in 1991, under the name of E-Trade Securities Inc®. This company provided trading services using both CompuServe® and America Online® as service providers. E-Trade Securities Inc® was at the forefront of a growing demand for direct access to financial markets. The introduction of the Internet and widespread availability of powerful computers made this transition possible.

In the mid-1990's, the company was renamed E-Trade Group® and became a publicly traded company. They joined a host of other companies that offered a combination of technology and service to investors. This combination of factors allowed the initial stock opening price to be quite high, buoying the companies profile and revenues. After many years in the market, expanding their product offering, and renaming the firm, E*Trade® attempted to purchase or merge with other discount brokers. This included unsuccessful attempted to purchase TD Waterhouse® and Ameritrade®. In 2004, E*Trade® secured Harrisdirect® and BrownCo®.

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The subprime crisis in 2007 was the driving force behind an arrangement with Citadel Investment Group®, to purchase all the subprime assets held by E*Trade® for $800 million US Dollars (USD). As a result of this arrangement, the firm recorded a $3.8 billion dollar (USD) loss in assets, Citadel® gained a seat on the board of directors, and the chief executive officer of E*Trade® resigned.

The products offered by E*Trade® remain focused on meeting the needs of the private investor. The firm offers access to online training resources, expert opinions from a wide range of sources and the ability for working people to manage their own retirement savings. It is important to note that all discount broker services clearly state that there is a risk of loss with any investment activity.

There are two types of broker services: full service and discount. A full service firm provides a broker, who is responsible for interacting with the client and managing their portfolio. The clients investments are pooled together into a larger pot and professionally managed. The fees charged reflect a certain level of professional service. In a discount firm, the fees are much lower, as there is no broker and each individual is responsible for his or her own transactions.

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