THIRD SUPPLEMENTAL INDENTURE

  E*TRADE FINANCIAL CORPORATION,

as Issuer

  THE BANK OF NEW YORK MELLON,

as Trustee

THIRD SUPPLEMENTAL INDENTURE, dated as of July 9, 2009 (the “ Third Supplemental Indenture ”) to the Indenture dated as of June 8, 2004 (the “ Base Indenture ” and   as supplemented by the First Supplemental Indenture dated as of September 19, 2005 (the “ First Supplemental Indenture ”) and the Second Supplemental Indenture dated as of November 1,   2006 (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 $500,000,000 aggregate principal amount of the Company’s 8% Senior Notes due 2011 (the “ Notes ”);

WHEREAS, the Company now proposes to retire up to approximately $435,500,000 aggregate principal amount of outstanding Notes and between $600,000,000 and $1,310,000,000 of outstanding 12.5% Springing Lien Notes due 2017 (the “ 2017 Notes ”) issued pursuant to the Indenture dated as of November 29, 2007, as supplemented by the First Supplemental Indenture dated as of December 27, 2007 and the Second Supplemental Indenture dated as of January 18, 2008, each between the Company and the Trustee, by issuing, in each case, a principal amount of zero-coupon convertible debentures equal to the principal amount of Notes or 2017 Notes to be exchanged (the “ Exchange Transaction ”);

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, 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:

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. Capitaliz