SEC FORM 4

SEC Form 4

FORM 4

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP

Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934
or Section 30(h) of the Investment Company Act of 1940

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Check this box if no longer subject to Section 16. Form 4 or Form 5 obligations may continue. See Instruction 1(b).

1. Name and Address of Reporting Person^*

NELMS DAVID W

(Last)

(First)

(Middle)

2500 LAKE COOK ROAD

(Street)

RIVERWOODS

60015

(City)

(State)

(Zip)

2. Issuer Name and Ticker or Trading Symbol
Discover Financial Services [ DFS ]

5. Relationship of Reporting Person(s) to Issuer
(Check all applicable)

X	Director	10% Owner
	Officer (give title below)	Other (specify below)

3. Date of Earliest Transaction (Month/Day/Year)
07/02/2007

4. If Amendment, Date of Original Filed (Month/Day/Year)

6. Individual or Joint/Group Filing (Check Applicable Line)

X	Form filed by One Reporting Person
	Form filed by More than One Reporting Person

Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owned
1. Title of Security (Instr. 3)	2. Transaction Date (Month/Day/Year)	2A. Deemed Execution Date, if any (Month/Day/Year)	3. Transaction Code (Instr. 8)		4. Securities Acquired (A) or Disposed Of (D) (Instr. 3, 4 and 5)			5. Amount of Securities Beneficially Owned Following Reported Transaction(s) (Instr. 3 and 4)	6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)	7. Nature of Indirect Beneficial Ownership (Instr. 4)
1. Title of Security (Instr. 3)	2. Transaction Date (Month/Day/Year)	2A. Deemed Execution Date, if any (Month/Day/Year)	Code	V	Amount	(A) or (D)	Price		6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)	7. Nature of Indirect Beneficial Ownership (Instr. 4)
Common Stock	07/02/2007		A		602,958⁽¹⁾	A	⁽²⁾	766,445.08⁽³⁾	D
Common Stock	07/02/2007		A		502,557⁽¹⁾	A	$0	1,269,002.08⁽³⁾	D
Common Stock								478.89⁽⁴⁾	I	By ESOP

Table II - Derivative Securities Acquired, Disposed of, or Beneficially Owned (e.g., puts, calls, warrants, options, convertible securities)
1. Title of Derivative Security (Instr. 3)	2. Conversion or Exercise Price of Derivative Security	3. Transaction Date (Month/Day/Year)	3A. Deemed Execution Date, if any (Month/Day/Year)	4. Transaction Code (Instr. 8)		5. Number of Derivative Securities Acquired (A) or Disposed of (D) (Instr. 3, 4 and 5)		6. Date Exercisable and Expiration Date (Month/Day/Year)		7. Title and Amount of Securities Underlying Derivative Security (Instr. 3 and 4)		8. Price of Derivative Security (Instr. 5)	9. Number of derivative Securities Beneficially Owned Following Reported Transaction(s) (Instr. 4)	10. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)	11. Nature of Indirect Beneficial Ownership (Instr. 4)
1. Title of Derivative Security (Instr. 3)	2. Conversion or Exercise Price of Derivative Security	3. Transaction Date (Month/Day/Year)	3A. Deemed Execution Date, if any (Month/Day/Year)	Code	V	(A)	(D)	Date Exercisable	Expiration Date	Title	Amount or Number of Shares	8. Price of Derivative Security (Instr. 5)		10. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)	11. Nature of Indirect Beneficial Ownership (Instr. 4)
Employee Stock Option	$20.47	07/02/2007		A		113,583		⁽⁵⁾	01/02/2010	Common Stock	113,583	⁽⁷⁾	113,583	D
Employee Stock Option	$25.36	07/02/2007		A		94,224		⁽⁵⁾	09/25/2008	Common Stock	94,224	⁽⁸⁾	94,224	D
Employee Stock Option	$25.36	07/02/2007		A		57,199		⁽⁵⁾	01/02/2009	Common Stock	57,199	⁽⁹⁾	57,199	D
Employee Stock Option	$22.24	07/02/2007		A		121,407		⁽⁵⁾	01/02/2011	Common Stock	121,407	⁽¹⁰⁾	121,407	D
Employee Stock Option	$19.41	07/02/2007		A		110,703		⁽⁵⁾	01/02/2012	Common Stock	110,703	⁽¹¹⁾	110,703	D
Employee Stock Option	$18.07	07/02/2007		A		55,818		⁽⁵⁾	09/25/2008	Common Stock	55,818	⁽¹²⁾	55,818	D
Employee Stock Option	$18.87	07/02/2007		A		113,856		⁽⁵⁾	01/02/2014	Common Stock	113,856	⁽¹³⁾	113,856	D
Employee Stock Option	$19.67	07/02/2007		A		52,489		⁽⁵⁾	09/25/2008	Common Stock	52,489	⁽¹⁴⁾	52,489	D
Employee Stock Option	$25.04	07/02/2007		A		30,913		⁽⁵⁾	01/02/2009	Common Stock	30,913	⁽¹⁵⁾	30,913	D
Employee Stock Option	$26.68	07/02/2007		A		45,315		⁽⁶⁾	12/12/2016	Common Stock	45,315	⁽¹⁶⁾	45,315	D
Employee Stock Option	$27.6	07/02/2007		A		124,024		⁽⁵⁾	01/02/2013	Common Stock	124,024	⁽¹⁷⁾	124,024	D

Explanation of Responses:

1. Restricted stock units that are convertible into shares of common stock at a ratio of 1 to 1.

2. These restricted stock units were granted by the issuer in replacement of 205,228 restricted stock units of Morgan Stanley in connection with the spin-off of the issuer by Morgan Stanley (the "Spin-Off").

3. Includes shares of common stock acquired in the Spin-Off.

4. These shares of common stock were acquired in the Spin-Off.

5. This option is fully exercisable.

6. This option vests in two equal annual installments beginning on December 12, 2008.

7. In connection with the Spin-Off, this option was granted by the issuer in replacement of an option to purchase 38,660 shares of common stock of Morgan Stanley at an exercise price of $60.14.

8. In connection with the Spin-Off, this option was granted by the issuer in replacement of an option to purchase 32,071 shares of common stock of Morgan Stanley at an exercise price of $74.50.

9. In connection with the Spin-Off, this option was granted by the issuer in replacement of an option to purchase 19,469 shares of common stock of Morgan Stanley at an exercise price of $74.50.

10. In connection with the Spin-Off, this option was granted by the issuer in replacement of an option to purchase 41,323 shares of common stock of Morgan Stanley at an exercise price of $65.34.

11. In connection with the Spin-Off, this option was granted by the issuer in replacement of an option to purchase 37,680 shares of common stock of Morgan Stanley at an exercise price of $57.03.

12. In connection with the Spin-Off, this option was granted by the issuer in replacement of an option to purchase 18,999 shares of common stock of Morgan Stanley at an exercise price of $53.09.

13. In connection with the Spin-Off, this option was granted by the issuer in replacement of an option to purchase 38,753 shares of common stock of Morgan Stanley at an exercise price of $55.45.

14. In connection with the Spin-Off, this option was granted by the issuer in replacement of an option to purchase 17,866 shares of common stock of Morgan Stanley at an exercise price of $57.80.

15. In connection with the Spin-Off, this option was granted by the issuer in replacement of an option to purchase 10,522 shares of common stock of Morgan Stanley at an exercise price of $73.56.

16. In connection with the Spin-Off, this option was granted by the issuer in replacement of an option to purchase 15,424 shares of common stock of Morgan Stanley at an exercise price of $78.40.

17. In connection with the Spin-Off, this option was granted by the issuer in replacement of an option to purchase 42,214 shares of common stock of Morgan Stanley at an exercise price of $81.10.

	/s/ Simon B. Halfin as Attorney-in-Fact for David W. Nelms	07/05/2007
	** Signature of Reporting Person	Date
Reminder: Report on a separate line for each class of securities beneficially owned directly or indirectly.
* If the form is filed by more than one reporting person, see Instruction 4 (b)(v).
** Intentional misstatements or omissions of facts constitute Federal Criminal Violations See 18 U.S.C. 1001 and 15 U.S.C. 78ff(a).
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