Thursday, May 18, 2017

I've Moved to PennTrade

Hopefully this is my last post on brokerage drama.  I have moved as many accounts as possible out of T Rowe Price and Fidelity over to PennTrade.  When people now ask me which brokerage house they should transfer OTC stocks into, I will answer PennTrade.
For the backstory I suggest you read all my posts on the page Dark Companies, The SEC, OTC Markets, Brokerages.

Last time I talked about brokerages I had transferred my Optionshouse accounts over to T Rowe Price.  I had to do this because Optionshouse abruptly closed my accounts and forced me to leave.  I investigated every brokerage I could find and in the end only a few would even take an account transfer including OTC stocks.

Out of T Rowe Price
I used T Rowe Price (TRP) for a short while and it was OK.  One big positive is they let me transfer my accounts with OTC stocks in kind from Optionshouse.  They got that done very quickly, it was a huge relief for me, and I'm thankful.  However there were two issues with TRP.  Issue one is they have a restriction of 50k shares max per online trade.  For example that would only be a $500 order with a $0.01 stock.  They allow larger trades by calling in but that's a problem for me as I work during the day.  It's fine for me to take a minute to enter an online trade but I can't be stepping outside to talk with a broker over the phone.  Issue two is TRP would not allow me to trade on my wife's account online even though she filled out the paperwork to give me permission.  I would have to call in which again is a problem.

I asked about getting these two issues addressed and got the indication they would not change.

Into PennTrade
So I have now moved into PennTrade.  I transferred our two TRP accounts as well as the few Fidelity accounts I could.  My wife and I now have two Roth IRAs, one Traditional IRA, and one standard brokerage account with PennTrade.  My 401k is still with Fidelity because my employer sponsors the account so they choose where it sits.

PennTrade is the online trading arm of Paulson Investment Company and they have focused on small markets for decades.  They have a long history of working in OTC stocks and I am hopeful they will continue as such.  I think Paulson realizes this is their niche and will work to keep it going whereas most other brokerages treat OTC stocks as an unfortunate headache.  PennTrade has a small town everybody knows your name feel to it.

Of course there are issues with PennTrade.  The website and interface are outdated and there's no phone app.  To login for online trading the website texts you a code.  OTC stock trades are $35 each.  But those are small annoyances to me when thinking of the big picture: they let me trade whatever I want.  It's great.  The account transfers all went smoothly.

The other issue right now with PennTrade is I can't trade OTC stocks online... (see below)

Knight and Citadel Market Makers:
PennTrade uses Knight Capital Group for their market maker so all trades go through Knight.  I won't pretend to know the whole chain of action with a trade but I know there are the brokerages, clearing firms, market makers, and probably more.  I hear Knight is the largest, or one of the largest, market makers in the United States.  For some reason Knight changed policy in January 2017 to no longer accepts OTC trades online.  PennTrade will still place OTC trades (in fact I placed a dark stock order today) but you have to call it in.  As Knight is so huge this must be affecting other brokerages but I haven't followed up.

PennTrade tells me they are in the middle of establishing a relationship with another market maker, Citadel Securities.  PennTrade's IT department is working on the electronic link and I'm hopeful this completes soon.  They are working on it.  Once the link with Citadel is up and running PennTrade will again allow all OTC trades online.


--Dan

6 comments:

  1. Why is PennTrade better than Interactive Brokers?

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  2. Main issue is they won't allow trades on grey market stocks. For example SIMA, IOMT

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  3. how did you come across penntrade? do you use a screener to find these otc stocks? if so, what screener? thanks for all the great articles!

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    1. I don't remember how I found PennTrade. Somehow it came up while googling around for any brokerage I could find last year. I spent quite some time trying to find as many as I could.

      No I don't use a screener. I am lucky enough to have people give me many ideas so I spend my time looking those over.

      If I were to screen it'd be something like this: stock price less than $1, market cap less than $10M, shares outstanding < 10M, rev > 0. Then check balance sheet, income statement, and chart.

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  4. Is PennTrade's link with Citadel up and running?
    If not, what is the situation?

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    1. It's not up and running yet so for now there is no online OTC stock trading. I have to call in which I hate but whatever. They let me buy and sell whatever I want and give the online broker rate.

      I asked for an update just the other day and all they could say is it's still in progress and the process is very slow. So I believe it will happen but I don't know when

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