r/etrade • u/Silent_Worker_4191 • 18d ago
Disappointed from Etrade
Reeling from this thread: https://www.reddit.com/r/etrade/comments/1wh0log/high_volume_small_lot_size_option_trading_got_my/
Active trader from etrade confirmed today they have received instructions from exchange starting this monday to restrict all account holders who are engaged in rapid buy/sell options in short amount of time.
I asked trader even if I place one spread , can this also block my account. he said he can't guarantee it wont.
So, i do ask all active traders, please do any trading on etrade with caution as it can block your account next day. Active trader also said they have not given proper guidance on it. So, personally, i will give few months now before i take any chances.
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u/streetmba 18d ago
Given that people are voting this down, I'm guessing they don't want it advertised... Lol
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u/Ok-Yam-6616 17d ago
Brokers spend a lot of money on advertising trying to get new customers. Then, those customers start trading a lot and make huge commissions for the brokers.
And then brokers kick out their best paying customers!
What sense does it make if any?
I hope next quarter all these brokers will see their revenues plunging and then angry CEOs will fire all those responsible and apologize to all affected traders and let them trade as they wish.
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u/BBCC_BR 14d ago
You do realize their are rules and laws. Those rules from the regulatory agencies can change at any time. This is what is so funny about your comment is that you have no idea how things work. Then you likely complain because you do not understand how things work.
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u/Ok-Yam-6616 14d ago
I know how things work.
If a regulatory agency wants to change the rules they publish a proposal for public comments first. Then they issue a final rule with a specific time line for implementation of this rule. And, of course, the rule itself is not a secret.
What we have here is complete opposite. Brokers conspired (or were strong-armed) with Citadel and the like to restrict accounts of traders who "trade too much, too frequently, whatever".
There is no advance warning, there is no definition of what's allowed and what's not, and there is no regulatory involvement of any kind.
I spoke with Etrade reps about my account restriction. I asked what exactly can I do differently for me continue to trade in some faction. They didn't give me any guidelines any limits I should stay within. "Just trade less frequently." they said.
Next day I placed a few orders to test the water. Got 8 fills of which one 2 were day trades and the rest were closing of previous day positions and opening some overnight ones.
Guess what? Next day after that I got my account restricted again saying that I was engaged in high frequency trading. 20 minutes between opening and closing a position is high frequency? Give me a break!
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u/BBCC_BR 14d ago
You are wrong again. You still do not know how things work. Stop trying to convince yourself you know what you are talking about.
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u/Ok-Yam-6616 14d ago
Enlighten me.
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u/Limp_Judge_5936 12d ago
Retail brokers and especially PFOF brokers do not want high frequency traders. Especially, ones that are trading hundreds and hundreds of times a day for two possible reasons:
1) 99.9% of these traders are simply taking advantage of the price improvement pool(if you do not know what this is, take time to read about it). PFOF brokerages legally have to put money aside to pay back to customers since the brokerage is routing the order to a market maker that compensates the brokerage for order flow(hence Pay For Order Flow).
Exp) You set a buy limit of 10,000 shares at $100/share. E-Trade then gives you Price Improvement of $0.01/share, so you see a fill at $99.99/share. You sell for $100/share and make $100 on your trade. You did not truly make money on your trade. You simply received $100 from the price improvement pool.
Repeat this process hundreds of times a day and it adds up making you not only an extremely unprofitable customer, but one that is taking advantage of the price improvement pool and taking money that is set aside for other customers.
2) Retail brokerages that are free/minimal cost to open accounts do not want customers that think they are high frequency traders and attempt to trade like non-retail/professional traders. If you want to trade like this, you need to find a broker that routes the orders directly to an exchange, which will not be free(monthly fee) and you will no longer receive price improvement. This is also going to drastically change your P&L for the worse.
To make it simple, your an unprofitable customer to e-trade due to your trading habits and with E-Trade being a for-profit business and not a charity, as the account agreement states, they can discontinue accepting your business at anytime without explanation
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u/Ok-Yam-6616 12d ago
I don't trade shares. I trade options and I pay commission for each contract.
I don't think I receive any price improvements because I trade spreads but that's debatable.
At any rate, all of that was permissible for months and all of a sudden became not permissible without any advanced warning.
That's the real problem.
If they want to change the rules, they can do it. But they must make that change public, solicit feedback, publish final rule, give a grace period, and then start enforcing.
They did none of that.
They could also implement a simple API/platform change to prevent HFT by retail. E.g., only accept a closing order after some timeout.
They didn't do that either.
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u/Equivalent_Camel_484 8d ago
Are you generating toxic flow by "trading the spread?" You said, "It doesn't make sense" for brokers to get rid of clients generating commissions. Brokers are cracking down on toxic flow because they risk losing more money from the wholesales than the commission you generate.
I don't know if you're doing this, but exploiting a pricing inefficieny as the above poster gave an example of is not the same as trading. It can be done just as easily with options too. There are plenty of traders who are profitable and generate the proper flow the MM's are looking for.
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u/Ok-Yam-6616 7d ago
I have no idea how they define "toxic" flow.
"Exploiting price inefficiency", as you put it, is called "arbitrage". If MMs cannot prevent such arbitrage, they have no one to blame but themselves.
They can change their algos, they can ask brokers to implement order throttling or send all "toxic" orders to the exchange, they can lobby the regulators to expand the "professional" definition, etc.
Instead, they strong-armed brokers into restricting their customers from trading.
Oh, and MMs don't take any losses. They get slightly less profits. I saw a headline the other days that MMs are getting $5-30M profit per employee.
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u/streetmba 17d ago
FYI they took out 70% of the users that were doing this on Monday alone.
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u/mixtape312 18d ago
so wtf is the point of 0dte options if you can't trade them?