The Nanny Broker thread

The Nanny Broker thread


Fidelity also makes you call in to trade more than 10k shares at a time. It’s not about the amount of the trade, just the number of shares, which is bizarre to me.

Fidelity also quizzes you when you apply to trade options. “If you want to go long on a stock, what type of option would you buy?”


Thanks for the update. SXVY and TVIX and such are all tradable there now? I don’t have an account to check.

A number of brokers either banned trading or seriously raised margin requirements in the wake of the Feb volatility crash that blew up one and nearly blew up several other inverse VIX products. Luckily this didn’t happen until after the first 1-2 days, when there were still good trading opportunities.


The 10k share thing is annoying but at least somewhat understandable. Trades of 10k or more can count as block trades, even if the stock is low priced, and block trade orders can be handled differently for sometimes better execution.

You can just place a trade for 9900 shares and avoid the hassle and phone call.

For options, brokers are supposed to make sure you know enough about them to have your trading losses be your problem and not your broker’s from a compliance perspective. Sometimes when applying for options trading permissions, you might have to answer a few basic questions like that.


Yes, I can trade the symbols you list plus ZIV, XIVH (may it rest in peace. It was the BEST!), VMIN, VMAX… It was only a week or two ban.

I get significantly better execution elsewhere, so I don’t do much with Fido on these products.


Not sure if this fits or not… (and these are as far as I know – maybe someone has a workaround for them!)

  • Fido won’t allow cash secured naked puts in an IRA but will allow purchase of SVXY, UVXY, etc which issue a K1

  • IB will allow cash secured naked puts in an IRA but will not allow purchase of SVXY, UVXY, etc citing “Special MLP not permitted for retirement accounts”

  • E*Trade allows both


Merrill Edge looking less good.

we’ll be placing restrictions on low priced securities beginning September 30, 2018. As a reminder, low-priced securities are generally defined as securities that trade over-the-counter at or below $5-per-share and/or are less than or equal to $300 million in market capitalization. In addition, they are generally quoted in over-the-counter markets and may also trade on securities exchanges, including foreign securities exchanges.

What’s changing on September 30? We’ll be applying a thorough regulatory review of sales and outgoing transfers of certain low-priced securities, which will result in trades or transfers being delayed or blocked.
If we restrict the sale of securities you currently hold, you’ll have the ability to keep your current positions in your account or transfer the positions to another broker dealer or transfer agent.

Don’t worry, they’ll let still let you buy junk stocks after they run way up and are over $5 / $300M. TLRY, I’m looking at you.


I’d stay away from MLPs in an IRA.


Vanguard will block purchase of any leveraged mutual funds/ETF/ETNs later this month. Existing positions can be held.


Hearing Fidelity blocks various types of apparently risk bonds, ie all Puerto Rico, and the like, among others. Probably not a great place for bond investors, and they’re bad on some types of preferred stocks as well (can’t trade online, but can call in orders if you care enough). Also heard some bad things about their FX conversion costs on foreign dividends.

For Merrill, it seems they recently imposed a 100 max contract limit across all uncovered options, regardless of exposure or number of stocks or whatever. You supposedly can get this increased with some higher level review process, but it’s not fast.


Is there something inherently different about brokerages? Are they liable for losses if you do something that wasn’t a good move?

My bank doesn’t call me when I withdraw money at a Vegas atm telling me I can’t withdraw because I shouldn’t be gambling. My credit card company doesn’t stop me from buying things they think I can’t afford. Why do brokerages do this?


I didn’t know this was a thing, since most of my trading experience is with Schwab. I agree that you can’t stop bad investors and that these policies are ridiculous.

Remember, we are not the typical customer. I wouldn’t mind if a brokerage wanted to put gates in place to warn people before they do stupid things to themselves. It shouldn’t take more than a simple phone call to remove it permanently.

I’m totally okay with Robinhood’s policy, though, since they target newbies.


But they do - your bank has an ATM withdrawal limit (most likely both per transaction and per day) you need to request special approval to exceed, and has restrictions that only allow you to withdraw cash you actually have in your account. Your credit card company only gave you a certain credit limit they’ll allow you to spend without first paying down the balance, and also offers numerous purchase protections after-the-fact.


Sure, but banks themselves are liable for fraudulent ATM withdrawals, so it makes sense they would set a limit. And your bank account isn’t a line of credit (generally), so it also makes sense that they would only allow you to withdraw what is in your account.

And similarly with a credit card, they’ve decided the extent that they are willing to accept losses if I fail to pay. Their decline of transactions is for the benefit of themselves, not the customer, which is the crux of my question - are these brokerages doing these things to protect their customers, or doing these things to protect themselves?


Both. An ATM withdrawal is it’s own transaction; what you do with the cash afterwards isnt the bank’s concern, their responsibility is getting your cash into your hands. A credit card offers chargebacks, to help ensure you do in fact get what you were buying. A brokerage is providing you direct access to the investments; they arent giving you your cash to do what you want in a subsequent transaction, and they cant offer the same back-end protections as credit cards to ensure you are getting what you think you are buying.

So brokerages are protecting the customer who is attempting something outside multiple deviations of typical customer risk levels, and protecting themselves from claims that they breached their fiduciary responsibility by allowing a customer to do something outside the relm of typical customer risk levels. For some things, they’ll allow on a case-by-case basis with a higher level approval. For others, it’s probably simply not worth setting up special authorizations for the handful of customers who would even request to be approved.


But they don’t have a duty to customers at all regarding unsolicited trades, certainly not a fiduciary duty. That’s what makes the whole thing so frustrating. Of course they can get sued by bad or unlucky investors, but those cases go to FINRA arbitration and lose, pretty much, unless there was a broker advisor involved and made unsuitable investments (what sort of investors is it for whom a money losing investment is, after the fact, suitable?).

I guess they just don’t want to deal with those nuisance suits, which cost them lawyer time if not settlement.


Ding! Ding! Ding!


Could still be fraudulent trades, someone gets logon credentials and makes trades pumping penny stocks, turns around dumping stocks from their legitimate account making a profit. Customer calls the bank says account was compromised, they’ll “reverse” the trades but end up eating the difference between buying and selling price.

Also, they want you to trade often and preferably have large balances because that’s how they are marking some of their money. Customers losing it all on penny stocks Vegas style doesn’t bring them money in the long run.


calling ameritrade a good (or discount for that matter) broker is laughable. they cost me >$50k years ago by blocking a trade, presumably because they had an opposing position in the stock.

one should stay away from the trading babies company as well.

IB is really the only ethical brokerage company out there.


If they are selling and you are buying (or vice versa), why would they block you? Isn’t any seller looking for a buyer and every buyer looking for a seller?

Most likely, they thought the trade was fraudulent or the market got to volatile.


Interactive Brokers blocked trading in many over the counter (OTC) stocks recently, if they aren’t paying to post their financials to or are otherwise flagged as more risky by that site. Disappointing, but probably doesn’t effect too many people.