Saturday, June 22, 2019

My Brokerages: Fidelity, Schwab, ETrade

If you have been a reader for a while you know of all the brokerage drama I've had.  It's all due to the tiny dark stocks I like and the industry moving against them.  I'm sure it doesn't make the brokerages any money so I understand.  I'm happy to report I have brokerages that work great for me.

The latest news is Penntrade has shut down so I transferred those accounts to Schwab.  I love Schwab.  I now use Fidelity, Schwab, and ETrade.  I hope this is my last brokerage related blog post...

You can read my broker mania here and let me just give a quick recap.  Years ago I used Fidelity for my 401k and it was all good until they blocked dark stocks in early 2016.  I had opened two accounts at Optionshouse in 2015.  They let me trade anything so I was great until they abruptly told me I had a month to get out.  I franticly searched for any brokerage to take my tiny dark OTCs in kind and only 2 of the 40 I contacted said they'd take my account transfers.  I went with T Rowe Price.  TRP was OK but soon I found two issues that bugged me with the main one being that I had to call in orders over 50k shares.  I then transferred to Penntrade.

Trouble at Penntrade started after only a few months as their clearing firmed caused them to stop online OTC trades in early 2017.  They also had higher fees of around $30 but I overlooked the issues since they would let me trade anything I wanted.  They always told me they were working on the online trading issue and I know they were a small boutique outfit so I let it be.  I always thought about transferring but had such issues getting in somewhere after Optionshouse I was in no rush.

A few weeks ago Penntrade forced my hand.  They've closed down.  See below for the message right now on their website.  I think Penntrade is the online trading platform of Paulson and RBC Correspondent services somehow is involved in the back end because my statements always said their name somewhere.  I don't know if Paulson is still around or what else RBC does.


So I called Penntrade.  The guy was not happy with what was going on but I didn't get into the back story.  Main thing is all accounts were transferring to Glendale Securities, a full service firm with no online trading.  Right there I knew it was time to move.  

In the mean time I had started using Schwab about a year ago when we sold our house.  I knew they would let me trade anything I wanted so that's where I opened up a brokerage account.  It's all online which is a major plus.  I'm a full time engineer and cannot be calling a broker all the time.  

When I had contacted all those 40 brokerages in the fall of 2016 I was not certain Schwab would allow an account transfer with the tiny dark OTC stocks inside.  For whatever reason I couldn't get a clean answer from them.  Now that I needed to move I thought I'd try transferring into Schwab and cross my fingers.  IT WORKED!!  I was so relieved.  I moved 3 accounts and everything made it through.  We are still moving one because of missing some RBC form.  It'll go through in another few days.  Then I just need my wife to give me trading authority and we'll be back in business.  

I am so relieved.  I hated calling in to Penntrade and it really decreased my activity.  I avoided it as much as possible.  I know have accounts at Fidelity, Schwab, and Etrade.  

Fidelity
I have one account at Fidelity and it's really just because I didn't want to move it when I changed jobs last year.  Fidelity was the 401k provider at my last job so there it is.  I have their BrokerageLink option which lets me trade individual stocks.  I cannot trade dark stocks here.  I am actually very active in this account and it's has done well.  I love Fidelity's website.

When I started the new job last year I was not sure if my new company's 401k would have a BrokerageLink type option or if they'd only allow mutual funds.  I couldn't take that risk and was not super motivated so I stayed at Fidelity.  

Etrade
This account I just got over the past year because I get some Restricted Stock Units (RSUs) at my new job.  These automatically flow into an Etrade account.  When I first got it I did test buys for HYDI and IOMT.  They went through so I stayed.  I have one after tax brokerage account here.  They let me trade anything and it's a cheap online broker.  

Schwab
My wife and I will have 4 accounts here once this last transfer goes through.  I have a Roth IRA.  My wife has both a Roth and Traditional IRA.  And then we have a joint after tax Brokerage account.  They let me trade anything I want and it's super cheap.  I can do grey market, dark, penny stocks, OTC, whatever.  

If anyone asks me for a recommendation lately I say Schwab.

--Dan

18 comments:

  1. Have you tried interactive brokers?

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    1. I've talked to them. Never had an account there. They don't allow grey market stocks (SIMA, IOMT)

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    2. I also remember hearing they would not allow a buy order if there was no current ask on the stock

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    3. I use IBKR, they take a very aggressive position on orders that could be "manipulative"; you end up having to use the chat to have them allow your limits all the time. But I've never had an issue with them allowing the orders. And the commissions are _dirt_ cheap.

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    4. IBKR they restrict your pennysocks without a notice. Getting restricted shares free takes 2 days to 4 week's!!!!

      Grey, value CE and other OTCs are not tradeable. Also it happens that they only let you sell a stock only or your position can't be sold anymore.

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  2. I dont understand when a stock goes to the grey market. E.g. I hold the pink sheet stock HERB, which is completely dark. It seems that this stock is not on the grey market, because I can still trade it with IB.
    On the other hand, STVVY on pink sheet is dark and on the grey (so called value) market and IB does not allow trading anymore. I could also buy HAUP at IB, which is completly dark, so it seems that this is not on the grey market as well.
    So it is unclear when a stock is transferred to the grey market.

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    1. Yeah I don't know what exactly kicks a stock onto the grey market.

      Here's the definition from otcmarkets.com, "Grey Market, "OTC" or "Other OTC" is a security that is not currently traded on the OTCQX, OTCQB or Pink markets. Broker-dealers are not willing or able to publicly quote OTC securities because of a lack of investor interest, company information availability or regulatory compliance."

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  3. I'm currently using TradeStation after it was recommended to me by Jan Svenda. Thus far I'm pretty happy with it. They allow the purchase of dark pink sheets and grey market stocks, trading fees are pretty low and there is no minimum account balance. They also accept international clients which was good for me since I'm based in the UK.

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    1. Great tip, thanks David! Just completed an application with them :)

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    2. I tried to transfer some IOMT (grey) and PRAC (no info / stop sign) into TradeStation, from Penntrade, and as predicted by Dan's research, they didn't accept it. FYI :)

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  4. I am wondering however if it makes sense to buy stocks on the grey market. Basically, e.g. there is no protection against fraud by the major shareholder or management because the stock is dark. Further, it is possible that trading will completly stop one day. In this case, the stock is usually a cero.

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    1. The exchange shouldn't matter. Fraud is everywhere. Evaluate each case individually.

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  5. update on Schwab. I received an email they will stop allowing purchases of OTC Markets "skull and crossbones" caveat emptor stocks after Jan 31, 2020. Can still sell and hold but no longer buy. It's sad
    -----------------------------------------------------------------------------
    By January 31, 2021, Charles Schwab & Co., Inc. (“Schwab”) will restrict orders in Caveat Emptor designated OTC securities to liquidating trades only. Closing trades will continue to be allowed after this time.

    Why is this change happening?
    A Caveat Emptor security is a designation the OTC Markets Group places on a security after a determination was made surrounding the company that there may be potential risk to investors which may include:
    • a potentially misleading or manipulative stock promotion,
    • known investigation of fraudulent or criminal activity committed by the company or insiders
    • regulatory trading suspensions or halts,
    • disruptive or undisclosed corporate actions, and/or
    • other reasons related to the public interest.
    Caveat Emptor securities have the potential for illiquid and highly volatile conditions. A skull and crossbones icon is placed next to the stock symbol.

    We are notifying you as you may have traded in or held positions in securities of this type within the past 12 months.

    What does this mean for your account?

    By the end of January, any positions held that are impacted by the Caveat Emptor designation will be set to liquidating transactions only and no opening transactions will be allowed for these securities. Any existing opening orders will be canceled but you may close out any open positions or continue to hold. You will not be allowed to add any new positions in these securities unless the Caveat Emptor designation is removed by OTC Markets Group.

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    1. The current list of impacted securities (which is subject to change) can be found here:

      https://cs1.schwab.com/track?type=click&enid=YXVpZD0zMjc0OTk5MTkmbWFpbGluZ2lkPTE1OTkyNyZtZXNzYWdlaWQ9ODMxMCZkYXRhYmFzZWlkPTE1MTk0JnNlcmlhbD02NzE1NDA2OCZlbWFpbGlkPURTQ0hVTU1ZQEdNQUlMLkNPTSZ1c2VyaWQ9Y2FtcG4xMjE4MTc1NDk4ODIwYmFjbXJrbHJpN2FhYWQ4eGV4YXZ5YyZ0YXJnZXRpZD0mbW49Nzk5MCZmbD0mbXZpZD0mZXh0cmE9JiYm&&&impacted_securities&&&https://www.schwab.com/caveatemptor

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    2. I recieved this same alert. Sucks because Schwab is the only broker I use that allowed me to trade Caveat Emptor stocks. Fidelity, eTrade, IB - no. I contacted LightSpeed - no. Do you know of any other brokers that allow trading in these stocks?

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    3. unfortunately I don't know of any brokerages that will allow the caveat emptor after 1/31.

      I'd bet Glendale Securities mentioned in this post allows it but they're full service.

      You could try contacting the brokerages who told me they'd allow trading of grey market stocks in this post: http://www.nonamestocks.com/2016/10/brokerage-firms-otc-markets-and-dark.html like for example T Rowe Price

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    4. TradeStation let me buy FULO (Caveat Emptor) and I've just put a test bid out on IOMT that was accepted. Having said that they have recently begun to put temporary trading restrictions on me buying/selling certain dark pink-sheets (for my own protection of course!). It's weird because there is no method to their madness, most dark pink sheets they still let me trade including sub-penny trash etc. I spoke to the equity desk about it but they were about as helpful as a chocolate teapot.

      The best approach, to my mind, is to have two or three accounts with the most OTC friendly brokers and then see what happens. It might be a case of having to pay up for a specialist broker if the current trend continues.

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  6. Well it seems Schwab is not going to allow buying of any dark stocks after Aug 2021. I contacted them today and was told this applies to all their accounts. The person did tell me "Currently there is no waiver for this rule. However this can change as we get closer to the date." when i asked about a waiver but I'm not holding my breath.

    Summary from the Schwab chat guy: "Schwab will only accept orders to liquidate positions (i.e. no new buy orders) starting late August 2021."

    https://www.schwab.com/resource/otcexpertmarket

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