BROKER DETECTIVE

As promised,I am continuing with some peculiarities of the Charles Schwab brokerage; not advertised for obvious reasons,which have caused aggravation and large losses for me over the years(that’s right… years).Hopefully when you are evaluating prospective Brokers you can use my misfortune to avoid the same problems.

Now as one of the original online brokers,Schwab uses a trading platform which is a “detuned” version of a acquisition they made years ago;Cyber Trader,at the time that company was regarded as having one of the most advanced trading platforms around,which may have been why they bought it; to integrate the trading software into the larger brokerage.Now that was a long time ago,and that trading platform that was state of the art,no longer is,yet Schwab persists in using this platform under the name “street smart pro”.It is neither.

None of that would be that big of a deal if they used there considerable resources and IT department to fix known flaws in the platform.Or replaced it.They just release new versions(read;add ons) with the same known bugs.This trading platform like most ;allows the customer to cancel replace quantity and prices of securities open orders by the customer in order to adapt to market conditions.Obviously this is extremely key feature that must function flawlessly with the increased volatility and quick price moves prevalent in the hedge fund dominated stock market.

The problem is; sometimes the trading platform will lock in the middle of a cancel replace cycle,or if there is a partial execution while the order is executed at the old price.What does this results in?let’s say you were attempting to sell 1000 shares of stock @$ 20.64 you then cancel replace to 20.4 because the price started to move away,but in the mean time you had a partial execution of 173 shares@ the original$ 20.64,the stock continues to fade so you lower your offer to sell to$20.2.This platform will sometimes not execute the remaining portion of the order.Not good ….but not a disaster yet!.The work around procedure should be to cancel the whole order.and start a new order”ticket” (in broker parlance )for the remaining shares not sold right?..and by the way this conveniently ends the original “ticket” which creates a separate commission charge for the portion not sold..that is now a new order.

Well there should be no problem selling the 1000-173=827 shares left right?Wrong! the trading platform doesn’t recognize that the securities have not been sold since the software cannot tell it has not executed,so therefore it will not permit the sale of the remaining stake you were trying to sell.Now what can be done now that the stock is sinking and you want to sell!!! get out!!!.First time this happened in 2002 (that’s right…. that how long they have know of this defect!)I assumed that it would be a matter of calling up the IT department and having them “unlock “the software glitch.That turned out to be a fantasy!,one that Schwab employees encourage by telling the customer ; “the order should go through now,it’s all unlocked”.They actually can’t unlock it.The only way to sell the security is with a phone order,then you can beg them to reduce the commission since the order had to be replaced due to a defect in there trading platform.

At one time , discount broker’s had large staffs to take telephone trades.Those days are gone!.Today when this happened i was on hold for 15 minutes waiting for a broker to answer phone ;as usually happens the market moves against you.Telephone trades are simply two slow(even without the 15 minute wait) when you are competing with other traders who are trading online. and i suffered losses .

This single defect, caused losses just today of aproxim.6000$,over a bunch of years I would estimate the losses in the $50,000 range just from this defect alone.Here’s the best part..Does this ever “unlock”?yes ;usually after a day or so weather they pretend to unlock it or not.However todays incident resulted from a partial execution on Friday..so you can see that this problem persisted for 3 days and may not resolve itself until tomorrow!!!.Ask yourself if you would be comfortable locking your account access down like this for days at a time,and think about various events such as earning releases,news releases,options expirations,emergencies..etc that would dictate a quick transaction and decide for yourself if this would be acceptable to you?If you would like to learn more about how to shop for a broker,visit Broker detective

First to any new visitors hello!.I am a independent investor who has changed stockbroker quite a few times searching for the right combination of products,trading platforms,and fees.It’s certainly been an adventure! and I thought that people could benefit from my experiences.If you would like to learn more about how to shop for a broker please visitBroker Detective.comThe companion site to this blog.I am now starting the individual brokers reviews i think i will post them here first and move them later to the website.Due to family considerations I have had accounts at Charles schwab for years.i don’t like them.I’ll tell you why ;and you can decide if these issues are important to you.#1 Do you like to trade stocks on earning news?,or in the after hours or pre market sessions(pre market is generally from 8 am est to 9;30 and after hours is 4pm est to 7or 8 pm est).even if you don’t normally, what if some negative event occurs and you need to get out of a stock position quick?.Charles Schwab closes trading from 9:15 am to 9:2999 am and again from 4pm to aprox. 4:05(sometimes 4:07)!!!.That’s right any open orders existing before then are canceled and will not execute..including stop loss and stop limit orders,and you can not buy or sell securities at those times.The buttons on the trading window do not operate until aprox.4.08,what’s worse orders submitted after 4;08 while accepted will not execute properly if at all.If you enter even market orders they will be held…why?because the bookeeping “department”(position checking) is totaling up and recalculating the balances  from the regular session to make sure there is buying power for your after market orders,there is no fixed time when this is finished!..it may run on till 4;30 depending on workload and market volume!!!..meanwhile your order is twisting in the wind!and won’t execute even if it is later”proved”to chuckies satisfaction that the account had sufficient buying power.Chuckies 1995 technology..is not wanted in 2007!!.All brokers have position checking..Schwab ’s is  just the worst,and works at commodore 64 speeds!It would be comical if it did not risk your money.This policy was in effect 5 years ago and inexplicably(read..there getting away with it)has never been fixed.Is this a big deal?only 20 minutes a day?..it’s huge! think about what happens in those 20 +minutes.The market makers move the bids and ask to adjust to the b.t. or s.t. open book which can result in big moves up or down in the price.frequently press releases or news stories break on news-wire or cnbc at these times ,that give you trading opportunities or potential losses.these times of day can often be your last hope of getting a price before the up or down leg!.The 5 minute after close is awful as well!..what happens in earning season?(like next week).That’s right ….many companies release the earnings at 4 pm sharp.that 5 minutes can be a life time.I have watched stocks I owned take 10 point dives and been trapped in the position helplessly,waiting for Chucky to open up again.I figure over the years the losses from this policy alone have been in the $50-70,000 range.You often don’t get another chance to get those prices when you miss an order in the stock market.It’s a bad ,inexcusable policy ,and it says a lot about the contempt they have for there customers.I’ll have more about Charles Schwab in my next post.

Any one using “street smart pro” trading platform @ Charles schwab ,have problems with the quote feed going down,this week?.Mine always seem to occur around 2 pm est.I learned long ago that talking to customer service is not too productive since they are not likely to say anything more meaningful than “we had a few problems and we’re working on it”.Of course it is entirely possible that Road runner was having a slow down which also seems to occur at certain times of the day.As the high speed customer base increases it’s share of the internet,it inevitably slows as it’s share of the traffic increases.Don’t know of a good way to test during a busy trading time to isolate the root of the slow down.Any one who had this problem?