IB now forcing traders to cross spread in OTCBB stocks

[eastern_warrior]

Why would they want to lose penny stock trading revenue? There is no reason they would. Rather, they are being pushed around by one of the few MM games in town. I'm sure there is a ton of complexity in their various contracts that none of us will ever know, but there is no way IB mgmt. suddenly woke up one day and decided they had no interest in collecting commission for transmitting orders.

Also, it might interest you that in many of these names, what you erroneously call an "odd lot" -- say, 2,000 shares -- can easily be 20% of the ADV. That's what makes this policy so absurd.

Taking a shot in the dark on this but
1 these are otcbb stocks. Who else is making a market - hence they need to adhere to what the market makers are demanding

2 FINRA hates otcbb stocks and brokers have unrealistic regulatory costs dealing with their questions and record keeping requirements - hence they May not be worth the trouble to offer them

 

[Sig]

Doesn't it bother anyone that a MM and

Taking a shot in the dark on this but
1 these are otcbb stocks. Who else is making a market - hence they need to adhere to what the market makers are demanding

2 FINRA hates otcbb stocks and brokers have unrealistic regulatory costs dealing with their questions and record keeping requirements - hence they May not be worth the trouble to offer them

Isn't record keeping and regulatory load less on OTCBB stocks? That's kind of the whole point, at least from the perspective of a company that sells their shares on OTCBB.

 

[eastern_warrior]

Doesn't it bother anyone that a MM and

Isn't record keeping and regulatory load less on OTCBB stocks? That's kind of the whole point, at least from the perspective of a company that sells their shares on OTCBB.

You need to read up on OTCBB. Shocking that you really think a broker/dealer can avoid a lighter load of reporting and regulatory requirements for OTCBB stocks?

Here's a start:

https://www.otcmarkets.com/services/market-data/otc-compliance/overview

http://www.reuters.com/article/finr...ket-boost-otc-oversight-idUSL2N0S32A120141008

and finally
https://www.sec.gov/fast-answers/answerspennyhtm.html
Because of the speculative nature of penny stocks, Congress prohibited broker-dealers from effecting transactions in penny stocks unless they comply with the requirements of Section 15(h) of the Securities Exchange Act of 1934 ("Exchange Act") and the rules thereunder. These SEC rules provide, among other things, that a broker-dealer must (1) approve the customer for the specific penny stock transaction and receive from the customer a written agreement to the transaction; (2) furnish the customer a disclosure document describing the risks of investing in penny stocks; (3) disclose to the customer the current market quotation, if any, for the penny stock; and (4) disclose to the customer the amount of compensation the firm and its broker will receive for the trade. In addition, after executing the sale, a broker-dealer must send to its customer monthly account statements showing the market value of each penny stock held in the customer's account.

 

[Sig]

These SEC rules provide, among other things, that a broker-dealer must (1) approve the customer for the specific penny stock transaction and receive from the customer a written agreement to the transaction; (2) furnish the customer a disclosure document describing the risks of investing in penny stocks; (3) disclose to the customer the current market quotation, if any, for the penny stock; and (4) disclose to the customer the amount of compensation the firm and its broker will receive for the trade. In addition, after executing the sale, a broker-dealer must send to its customer monthly account statements showing the market value of each penny stock held in the customer's account.

My brokers do all those things for my regular account, doesn't yours?

 

[MoreLeverage]

But if it was regulatory burdens related to allowing customers to trade OTC stocks, they would just ban all otc orders, not just smaller ones. It's clear this is coming from the market maker side, not the broker side.

 

[Shadetree42]

Taking a shot in the dark on this but
1 these are otcbb stocks. Who else is making a market - hence they need to adhere to what the market makers are demanding

2 FINRA hates otcbb stocks and brokers have unrealistic regulatory costs dealing with their questions and record keeping requirements - hence they May not be worth the trouble to offer them

1. Note that no other broker is implementing these min. order sizes.

2. See #1. Also, it's the exact opposite of what you suggest. They didn't abandon penny stock trading. They still offer the same number of names; they just made it very difficult to trade them. So their regulatory overhead remains unchanged, yet their commission revenue plunges.

 

[truetype]

Note that no other broker is implementing these min. order sizes.

So presumably you've moved your business to other brokers?

So their regulatory overhead remains unchanged, yet their commission revenue plunges.

Peterffy should hire you as a consultant! Obviously you know better than he how to run IB.

 

[Sig]

So presumably you've moved your business to other brokers?



Peterffy should hire you as a consultant! Obviously you know better than he how to run IB.

A CEO who thinks they know better than their customers is a shitty CEO, according to almost any work that's been done on the subject.

 

[truetype]

A CEO who thinks they [sic] know better than their [sic] customers is a sh¡tty CEO

So you can read Peterffy's mind? Nice -- now he has a consultant (Shadetree) and a psychologist (you) available!

 

[Sig]

So you can read Peterffy's mind? Nice -- now he has a consultant (Shadetree) and a psychologist (you) available!

Your comment "Peterffy should hire you as a consultant! Obviously you know better than he how to run IB." pretty clearly indicates someone who feels that it's inappropriate for a customer who is unhappy with a company's services to tell them that and that the CEO of a company always knows better than their customers. That line of thinking makes for horrible CEOs. I would love to have my customer's tell me what they don't like about what we're doing, in fact I ask them repeatedly and when I do something I know they're not going to like I explain why. Making irrational changes that you then provide irrational explanations for isn't how you run a business. Criticizing the customer who dares complain about such shitty business practices is definitely not how you run a business. IB is leaving a bunch of profit on the table by unnecessarily being assholes to customers when it would cost them nothing to just behave more rationally and explain why when they appear not to. That's business 101, not psychology. Peterffy might be a demi-god who can do no wrong in your eyes, but the feeling certainly isn't universal.