ThinkOrSwim - manually reviewing shorts

J

JavaBen

I was trading AMZN today, when I went to enter a small short sell 'at market' order. I have plenty of funds in my account. There were numerous bids on their 'active trader' Level II view, so there wasn't a lack of bids to buy my sell at market.

It didn't trade. It just moved up and down, tracking the highest bid. Meanwhile the stock kept moving lower and lower. I watched as my potential profits evaporated and my risk increased. It was all happening rather rapidly. I closed the short sell order.

I have had this happen a few times recently, and with all the problems I've had with the TOS software, I assumed this was a problem with the software. But it's happened enough I decided to contact TOS support on this.

They informed me that, beginning in mid-August, with the change to a different clearing house (I think this went from Penson to TDAmeritrade, but not positive), they now have a "team of people" that manually review and and clears short trades! This isn't an assumption on my part- this is what TOS support told me!

They also told me to enter stop orders and that "would help".

However, with the market turning and running out from under me, I wanted an "at the market" short sell. I don't even know if I could have gotten a stop in, as it would have probably ended up above the market. This inability to place the trade resulted in a significant loss of profits to me today.

Note that this wasn't a lack of stock to borrow, nor a lack of funds in my account, otherwise a stop-sell wouldn't have helped. It is the time required for a "team of people" to manually review my order before it is "cleared" to be enabled for transacting.

Support told me they are "in discussions" about this, but that it would not be changed anytime soon.

They also acknowledged that this wasn't mentioned in any of the information provided to me when they announced their change of clearing houses. It was just left up to me to find out right when I needed it.

So I'm now going to have to change companies, and learn a new platform.

If you trade short, note this was a problem for me.

If I hadn't seen it, and asked about it, and been told by TOS support, I wouldn't have believed that they were manually clearing short sell orders in a live market with a "team of people".
 
If you are looking for a broker to short stocks through, MBTrading clears through Penson and I do not think I have experienced any unusual problems with shorts on stocks filled through MBTrading. I like Interactive Brokers (IB) but I no longer short stocks through IB due to short interest fees IB has recently started charging on short stock borrowing.
 
Yeah, this is the reason I originally left TD years ago for TOS. Still trying to figure out what to do. Of course, now mostly I do things through options, as that's what TOS was oriented towards and so I learned, and so now it's not as much of a problem; still, what you want is to trade with someone who allows you the freedom to execute in whatever way you feel is correct without being hampered by crap like this.
 
Thank goodness you could cancel your market order. One broker I used to use would occasionally manually review orders (they couldn't tell me their algorithm, but it seemed that once I exceeded my overnight buying power then all orders for the rest of the day would be manually reviewed). If one of those orders happened to be a market order, the software would not let you cancel it, and you'd get filled one, two, or three minutes later, whenever the human approved the order.
 
Quote from Catoosa:

If you are looking for a broker to short stocks through, MBTrading clears through Penson and I do not think I have experienced any unusual problems with shorts on stocks filled through MBTrading. I like Interactive Brokers (IB) but I no longer short stocks through IB due to short interest fees IB has recently started charging on short stock borrowing.
More...


Does IB charge a fee on every stock you short, or just the hard-to-borrow stocks?

I would not expect AAPL, AMZN to be in this group of hard-to-borrow...

Thanks.
 
Quote from shfly:

Does IB charge a fee on every stock you short, or just the hard-to-borrow stocks?

I would not expect AAPL, AMZN to be in this group of hard-to-borrow...

Thanks.
More...

You can go to IB's home page > Trading > Short Sales > paragraphs 4 & 5 to find the following information:
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# Cash from the short sale is used as collateral on borrowed shares.
When the trade settles, the cash received from selling the shares is used as collateral on Trader A's borrowed shares. Trader A's Broker invests the cash collateral.

# Interest is paid to or by the short seller( if applicable).
A portion of the interest from the invested collateral is used to pay administration fees and stock borrowing fees. Because of steep administration costs, remaining interest is generally only paid out to large balance short sellers. In certain hard to borrow cases, borrowing fees are so high (greater than the interest earned) that the short seller ends up paying additional interest for the privilege of borrowing a security. Customers may view the indicative short stock interest rates for a specific stock through the Short Stock (SLB) Availability tool located in the Tools section of their Account Management page.
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Example: On 02-01-11 I shorted 1400 shares of MOO. On 02-03-11 I covered the 1400 shares of MOO. My short interest fee for the two days of being short 1400 MOO was $24.32 which exceeded my IB commission of $14.00. That ended my short selling of stocks through IB until the interest rate environment in the USA improves ( the Fed Chairman is no longer forcing short term interest rates to almost zero). IB is looking out for IB's interest as they well should. IB now earns near zero on the invested collateral and passes the cost of borrowing to the short seller.
 
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