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^*

Corley Kathryn McNamara

(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)

	Director	10% Owner
X	Officer (give title below)	Other (specify below)
	SVP,General Counsel&Secretary

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		78,889⁽¹⁾	A	⁽²⁾	90,768.39⁽³⁾	D
Common Stock	07/02/2007		A		107,690⁽¹⁾	A	$0	198,458.39⁽³⁾	D
Common Stock								2,119.01⁽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	$12.13	07/02/2007		A		4,001		⁽⁵⁾	01/02/2009	Common Stock	4,001	⁽⁷⁾	4,001	D
Employee Stock Option	$20.47	07/02/2007		A		11,293		⁽⁵⁾	01/02/2010	Common Stock	11,293	⁽⁸⁾	11,293	D
Employee Stock Option	$22.24	07/02/2007		A		13,015		⁽⁵⁾	01/02/2011	Common Stock	13,015	⁽⁹⁾	13,015	D
Employee Stock Option	$19.41	07/02/2007		A		11,011		⁽⁵⁾	01/02/2012	Common Stock	11,011	⁽¹⁰⁾	11,011	D
Employee Stock Option	$14.49	07/02/2007		A		25,886		⁽⁵⁾	01/02/2013	Common Stock	25,886	⁽¹¹⁾	25,886	D
Employee Stock Option	$18.87	07/02/2007		A		21,459		⁽⁵⁾	01/02/2014	Common Stock	21,459	⁽¹²⁾	21,459	D
Employee Stock Option	$18.94	07/02/2007		A		30,043		⁽⁵⁾	01/02/2008	Common Stock	30,043	⁽¹³⁾	30,043	D
Employee Stock Option	$26.68	07/02/2007		A		6,537		⁽⁶⁾	12/12/2016	Common Stock	6,537	⁽¹⁴⁾	6,537	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 26,852 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 1,362 shares of common stock of Morgan Stanley at an exercise price of $35.65.

8. In connection with the Spin-Off, this option was granted by the issuer in replacement of an option to purchase 3,844 shares of common stock of Morgan Stanley at an exercise price of $60.14.

9. In connection with the Spin-Off, this option was granted by the issuer in replacement of an option to purchase 4,430 shares of common stock of Morgan Stanley at an exercise price of $65.34.

10. In connection with the Spin-Off, this option was granted by the issuer in replacement of an option to purchase 3,748 shares of common stock of Morgan Stanley at an exercise price of $57.03.

11. In connection with the Spin-Off, this option was granted by the issuer in replacement of an option to purchase 8,811 shares of common stock of Morgan Stanley at an exercise price of $42.56.

12. In connection with the Spin-Off, this option was granted by the issuer in replacement of an option to purchase 7,304 shares of common stock of Morgan Stanley at an exercise price of $55.45.

13. In connection with the Spin-Off, this option was granted by the issuer in replacement of an option to purchase 10,226 shares of common stock of Morgan Stanley at an exercise price of $55.64.

14. In connection with the Spin-Off, this option was granted by the issuer in replacement of an option to purchase 2,225 shares of common stock of Morgan Stanley at an exercise price of $78.40.

	/s/ Simon B. Halfin as Attorney-in-Fact for Kathryn McNamara Corley	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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