THIRD SUPPLEMENTAL INDENTURE

THIRD SUPPLEMENTAL INDENTURE, dated as of July 9, 2009 (the “ Third Supplemental Indenture ”) to the Indenture dated as of November 29, 2007 (the “ Base Indenture ” and as supplemented by the First Supplemental Indenture dated as of December 27, 2007 (the “ First Supplemental Indenture ”) and the Second Supplemental Indenture dated as of January 18, 2008 (the “ Second Supplemental Indenture ”), the “ Indenture ”), between E*TRADE FINANCIAL CORPORATION (the “ Company ”), a Delaware corporation, and THE BANK OF NEW YORK MELLON, a New York banking corporation, as trustee (the “ Trustee ”).

WHEREAS, the Company has duly authorized the execution and delivery of the Base Indenture, the First Supplemental Indenture and the Second Supplemental Indenture and up to $1,936,000,000 (plus any Capitalized Interest) aggregate principal amount of the Company’s 12.5% Springing Lien Notes due 2017 (the “ Notes ”);

WHEREAS, the Company now proposes to retire up to approximately $435,500,000 aggregate principal amount of outstanding 8% Senior Notes due 2011 (the “ 2011 Notes ”) issued pursuant  to the Indenture dated as of June 8, 2004, as supplemented by the First Supplemental Indenture dated as of September 19, 2005 and the Second Supplemental Indenture dated as of November 1, 2006, each between the Company and the Trustee, and between $600,000,000 and $1,310,000,000 of outstanding Notes by issuing, in each case, a principal amount of zero-coupon convertible debentures equal to the principal amount of Notes or 2011 Notes to be exchanged (the “ Exchange Transaction ”);

WHEREAS, the Company proposes to amend clause (1) of the definition of “Change of Control” as set forth herein to make such definition consistent with the analogous definitions in the 2015 Notes Indenture, the 2013 Notes Indenture and the 2011 Notes Indenture;

WHEREAS, the Company has applied to raise additional cash proceeds by participating in the TARP Capital Purchase Program (the “ Program ”) of the United States Department of Treasury (“ Treasury ”) by issuing senior perpetual preferred stock qualifying as Tier 1 Capital and associated warrants to Treasury;

WHEREAS, in connection with its proposed participation in the Program, (a) the Company shall be permitted to (i) issue senior perpetual preferred stock to Treasury qualifying as Tier 1 Capital and pay the dividends accruing and payable thereon and issue warrants to purchase the Company’s Common Stock, (ii) issue preferred stock or common stock in one or more Qualified Equity Offerings (as defined below), pay dividends accruing and payable on any such preferred stock and use the proceeds from one or more Qualified Equity Offerings to redeem or repurchase the preferred stock and warrants initially issued to Treasury, (iii) issue Substitution Permanent Equity (as defined below) and pay dividends accruing and payable thereon to the extent required by the Program, (iv) otherwise comply with the terms and conditions of the Program to the extent required by Treasury for participation therein and (b) the Company proposes to amend the Indenture in connection with the foregoing and as set forth herein;

WHEREAS, Section 9.02(a) of the Base Indenture provides that the Company and the Trustee may amend the Indenture with the consent of the Holders of a majority in aggregate principal amount of the outstanding Notes, provided certain conditions are met;

WHEREAS, the Holders of a majority in aggregate principal amount of the outstanding Notes eligible to vote have consented to the amendments set forth herein;

WHEREAS, the Company desires and has requested the Trustee to join it in the execution and delivery of this Third Supplemental Indenture in connection with the foregoing;

WHEREAS, the conditions set forth in the Indenture for the execution and delivery of this Third Supplemental Indenture have been complied with; and

WHEREAS, all things necessary to make this Third Supplemental Indenture a valid agreement of the Company and the Trustee, in accordance with its terms, and a valid amendment of, and supplement to, the Indenture have been done.

NOW, THEREFORE:

The Company agrees with the Trustee, for the equal and ratable benefit of the holders of the Notes, that the Indenture is supplemented and amended, to the extent expressed herein, as follows:

Section 1.01. Scope of Supplemental Indenture; General . This Third Supplemental Indenture supplements the provisions of the Indenture, to which provisions specific reference is hereby made. Capitalized terms used but not defined herein have the meanings ascr