TRADER LOSES $120,000 but TD Ameritrade refuses to honor their policy of making customers whole ….

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Trader losses $120,000 due to TD Ameritrade Lagging Quotes !


Contact Me If  You Have Any Questions

 UPDATE 06/01/2011 – I am still waiting to hear from TD Ameritrade . The Old COO has been fired and replaced with a new COO but nobody from TD Ameritrade has contacted me about their company policy to make me whole . Recently the SEC has reminded Broker Dealers that they will be heald responsible for tech glitches  See    Sec To Brokers – Execs On Hook For Operational Glitches/

UPDATE 11/18/2010 -   The Compliance Department is refusing to do anything . JEFF PLUMMER and other TD AMERITRADE Employees  are refusing to acknowledge their company policy . The Original article which was on wsj.com has been removed by somebody and other links to the article online are being removed . Basically, TD Ameritrade is supplying bad quotes and when you go to them with it they refer you to their client agreement but there are Fed Securities Laws that say that can do that .  SEND THIS SITE to  James Reilly- Managing Director, Chief Compliance Officer at TD Ameritrade.

Finra Rule -It shall be deemed inconsistent with Rules 20102020 and 5210 for a member, for itself or for any other person, to publish or circulate or to cause to be published or circulated, by any means whatsoever, any quotation for any security without having reasonable cause to believe that such quotation is a bona fide quotation, is not fictitious and is not published or circulated or caused to be published or circulated for any fraudulent, deceptive or manipulative purpose.

See Other Sec laws here  http://stockmarketloss.wordpress.com/td-ameritrade-and-sec-laws-and-finra-rules/

TD Ameritrade knowingly supplied me wrong quotes for months but TD AMERITRADE HAS REFUSED TO “MAKE ME WHOLE” BY HONORING THEIR POLICY. The people I communicated with at TD Ameritrade have refused to acknowledge this policy. Nobody seems to want to discuss this policy . I hope I can get some answers from TD Ameritrade  . To see screen shots and the original letter I sent to them go here http://dearameritrade.wordpress.com/

If you know anybody at TD Ameritrade forward this blog to them ! I have been trying to reach the Chief Compliance Officer Lisa Henoch but no luck yet Thanks .

If you knew the quotes that your broker was supplying to you were wrong and that you would lose all your money would you make trading decisions based on those quotes ? The answer is NO only a fool would, but TD Ameritrade was providing quotes that they knew were wrong but did not alert or notify customers about this problem and when I brought it to their attention I was told that they were not obligated to notify customers because their client agreement says that they don’t guarantee their software . As a trader – Unless you have 2 quote feeds and you are comparing your TD Ameritrade quotes with quotes from another provider it is almost impossible for you to figure out that your quotes are WRONG so if your quote provider doesn’t tell you the quotes are bad you will keep trading until you are wiped out and that’s what happened to me .

My name is Uzoma and I had been a Client of TD Ameritrade for over 10 Years . I trade options for a living . In April 2010 my options Level 2 quotes broke and for over one month I unknowingly traded with the bad quotes . This caused me to lose $120,000. The level 2 quotes which are supposed to be real time were not real time and in fact lagged the real time by about 2 to 3 minutes .  When I found out  in May that my extensive loses were due to the faulty level 2 quotes . I contacted TD Ameritrade and asked them to make me whole as per their Company Policy. I first spoke to an Analyst  – Tommie Richardson who told me that even though they were aware of the Streaming Quote issues TD Ameritrade doesn’t compensate anybody for losses . I asked her why they did not notify their clients about the problem since they were aware of the potential for loses and she said they were not required to notify anyone because they don’t guarantee their software just like their client agreement says .I tried to explain to her that what she was saying made no sense because they know that people will lose all their money by trading with the wrong quotes, but she stuck to her argument that they don’t guarantee their software will work all the time just like the client agreement says (See No 7 of Client Agreement) . I told her about their Company Policy that says they will make people whole for loses that are caused by technology issues and she said she had never heard of it . Why would anybody in their right senses trade with quotes that are wrong ? Anybody trading with inaccurate quotes is guaranteed to lose all their money .

I then worked my way up to  Jeff Plummer (TD Ameritrade Compliance Manager)  . I sent a letter to him explaining the lagging quote issue as well as my conversation with Tommie Richardson  and he told me he would assign his Top Analyst to research the issue and get back to me in 15 business days . After 3 weeks I got A Letter in the mail telling me that even though TD Ameritrade was aware of the lagging Level 2 Quote problems NO COMPENSATION WOULD BE FORTH COMING . He purposely ignored the reference I made to their company policy and told me that I signed the client agreement . To confirm Tommie Richardsons argument that TD Ameritrade did not have to notify clients or even fix the Lagging Quotes Problem – my level 2 quotes stayed broken from the day I notified TD Ameritrade in May till the day they Forcibly Terminated my account in September . Nobody contacted me about fixing the problem and after 4 months when I sent the Compliance Manager Jeff Plummer an email asking him why the level 2 problem had not been fixed after 4 months,  2 days later I got a letter from Lynda Krueger Hoffman saying that TD Ameritrade had terminated my account . I guess so that I won’t be able to keep asking them why they had not fixed the problem . I WOULD LIKE TO GET SOME ANSWERS FROM TD AMERITRADE EXECUTIVES about what exactly their policy is. – Send this blog to any contacts you know at TD AMERITRADE if you would like to get answers too .

Something is wrong here . Somebody is either lying or doesn’t know their own policy . COO Dave Kelly says that TD Ameritrade has to take some responsibility for these tech issues but yet the analysts are saying something else .Tommie Richardson of TD Ameritrade admits that their software has problems that they know about but they are letting people keep trading with the bad quotes  only to say that their client agreement covers them from doing anything about it . Tommie Richardson did not make a mistake when she said that they did not have to do anything about it because when a message was sent to TD Ameritrade telling them about the wrong quotes and asking why clients were still allowed to trade with this bad data, another Analyst – Daniel Pilmaier, Senior Research Analyst, Office of the President  said that even though the problem was identified as an issue originating from their quote provider “We would not intentionally deter clients from trading by removing the capability to”  WTF ????  So, basically they are just sitting in their offices watching people lose money and when people realize what is going on their (TD Ameritrade’s) defense is that the client signed the client agreement . People open accounts with broker dealers to make money NOT to lose money ! If I did not find out about these quote problems by myself I would have borrowed money to wire into my account and lost it all too. What about someone that opens a new account and doesn’t know the quotes are bad ?

TD Ameritrades actions speak louder than words . When I contacted the compliance manager Jeff Plummer, I expected him to tell me that Tommie Richardson’s response to me was wrong but after 3 weeks of him assigning his best analyst to research the case   he basically sided with her by saying that they were aware of the problem and would not give me any money .

Lagging level 2 option quotes that are wrong every single minute of everyday for 4 months ARE 100% Unacceptable ESPECIALLY when TD Ameritrade knows about the problem but insists that their Client Agreement is an excuse for them not to do ANYTHING. Basically somebody is sitting in their office watching people lose all their money and they don’t see anything wrong with it . People wire money into Ameritrade to MAKE MONEY and not LOSE MONEY . Why would anybody use Ameritrade if they know that when there is a problem Ameritrade will sit by and watch them go bankrupt only to tell the client that they signed the Client Agreement .

This makes no sense because there are SEC Laws that govern  the way Broker Dealers operate . Broker dealers can’t just provide wrong quotes to customers so that customers can keep trading and making them commissions while they the customers keep losing money . Why would anyone try to make money trading with bad quotes and why would any broker knowingly let people trade with bad quotes ?

Chief Operating Officer Dave Kelly (an executive who has over 20 years experience) had an interview with Dow Jones and talked about the company policy that says that  they will make clients whole for loses they sustained due to the tech issues . Dave Kelly knows his Company Policy very well and he knows his Company’s technology very well but I can’t seem to get anybody else at the company to even discuss this policy . Dave Kelly talked about taking responsibility for the tech issues and he talked about compensating the clients affected by the tech issues . He could have just said that the clients have signed a CLIENT AGREEMENT but he did not say that because he knows that he is bound by SEC Laws . These tech issues are well known to TD Ameritrade . I have sent several letters to Jeff Plummer (TD Ameritrade Compliance Manager) and he has REFUSED to apply this company policy to me . In fact he has not acknowledged the policy, and in his responses to me he has deliberately avoided mentioning this policy.

As a matter of fact – When I realized that Jeff Plummer and Tommie Richardson had avoided acknowledging their company policy, I sent a complaint to the SEC and FINRA with the link to the WSJ (Wallstreet Journal) article that had the interview which DAVE KELLY gave Dow Jones but I was shocked when the link to the article on the WSJ vanished . The article with the interview was gone but fortunately I had made lots of screen shots plus some other sites like Fox Business had also carried the the article . You can draw your own conclusion about what you think happened .

If you know anybody at TD Ameritrade forward this blog to them so that this issue can be clarified  . I would like my $120,000 back per their policy . Thank You !


TD AMERITRADE’S POLICY - This policy has been in existence for many many years and COO David Kelly repeated it in June 2010 during an interview .

In an interview with Dow Jones Newswires Wednesday, Kelley, who is also head of technology for TD Ameritrade, said the company “has to take some responsibility” for website, server, and streaming-quote issues that affected brokerage clients on three separate days over the past three weeks.

“I don’t want to push [these problems] off on other people…these events almost never happen, but in the end it’s our problem.”

Kelley said the Omaha, Neb., company’s policy is to “make clients whole for whatever inconvenience they encountered” on days when they experienced a service disruption.

Ameritrade has offered to compensate some investors financially for monetary losses during the technology issues, while offering others free trades on a “case-by-case” basis.

IS THIS A NEW POLICY  ?  NO !  
TD Ameritrade has reimbursed many of their clients over the years here are some examples below . I do not know why Jeff Plummer Compliance Manager at TD Ameritrade is playing games . What kind of Compliance Manager pretends that a COMPANY POLICY does not exist ? I have sent Jeff Plummer several letters referencing this policy but till today no response discussing this company policy . I have also sent 4 letters to LISA HENOCH - CHIEF COMPLIANCE OFFICER  of TD AMERITRADE complaining about Jeff Plummers conduct and asking her to look into this case but I am still waiting for a reply from her .
  • In October 2006 during an Earnings Conference Call CFO Bill Gerber said As you can see, expenses before advertising were $255 million for the quarter. The primary difference was in other expense, which was $8 million higher, predominantly as a result of a stock split where we received inaccurate information from a third party, which ultimately resulted in our clients being short shares of the company that split. As an accommodation to those clients who acted on this information, we made them whole, costing us $6 million.
  • According to A 1999 Sec filling by Ameritrade – See Page 13 In September 1998, we became subject to a putative class action lawsuit resulting from systems failures and delays. In addition,from time to time, we reimburse our customers for losses incurred in connection with systems failures and delays. During the quarter ended December 31, 1998, we paid $3.1 million to customers for execution price adjustments as a result of systems failures and delays.


SECURITY & EXCHANGE COMMISSION/FINRA - I have listed a few duties rules and laws below. There is no way a broker dealer  is allowed to supply bad quotes especially when it is a known issue . Jeff Plummer, Tommie Richardson and Daniel Pilmaier who are all registered brokers should know the SEC rules and laws as part of their jobs .

  • The obligation to maintain operational capability is not new. The securities laws have always required firms to handle customer transactions properly, whether manually or electronically. It is a violation of the antifraud provisions of the securities laws for a broker-dealer to accept orders without having sufficient personnel and facilities to properly execute securities transactions. See, Securities Exchange Act Release No. 8363 (July 29, 1968), 33 FR 11150.Click here to read on SEC’s website

 

  • Firms should also use every reasonable effort to notify customers of operational difficulties. In addition, to assist in monitoring and planning for systems disruptions, firms should consider maintaining records of capacity evaluations and system slowdowns and outages, including details on the cause and impact of the problem. Click here to read on SEC’s website
  • The “antifraud” provisions prohibit misstatements or misleading omissions of material facts, and fraudulent or manipulative acts and practices, in connection with the purchase or sale of securities. Broker-dealers owe their customers a duty of fair dealing. This fundamental duty derives from the Act’s antifraud provisions mentioned above. Under the so-called “shingle” theory, by virtue of engaging in the brokerage profession (e.g., hanging out the broker-dealer’s business sign, or “shingle”), a broker-dealer represents to its customers that it will deal fairly with them, consistent with the standards of the profession. Based on this important representation, the SEC, through interpretive statements and enforcement actions, and the courts, through case law, have set forth over time certain duties for broker-dealers. These include the duties to execute orders promptly, disclose certain material information (i.e., information the customer would consider important as an investor), charge prices reasonably related to the prevailing market, and fully disclose any conflict of interest. Click here to read on SEC’s Site
  • Duty of Best Execution – Broker Dealers have a duty of Best Execution . A Broker Dealer cannot honor their duty of Best Execution if the quotes being displayed on your screen are wrong . A traders order will never get filled at the best bid or ask price because they are looking at the wrong quotes Click here to read about the duty of Best Execution on FINRA website ………….   S.E.C. Rule 15c1-2 prohibits “any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.” Under the commission’s view, the best execution duty derives from common law agency principles that require an agent to put the principal’s interests ahead of its own, so a violation of that obligation operates as a fraud.
  • Section 29(b) of the Securities Exchange Act permits a party to a contract to seek its rescission if performance of the contract “involves the violation of or the continuance of any relationship or practice in violation of,” any provision of the Securities Exchange Act of 1934. Federal law – 15 USC §78cc(a) (“Any condition, stipulation, or provision binding any person to waive compliance with any provision of this chapter or of any rule or regulation thereunder, or of any rule of an exchange required thereby shall be void.”)
  • FINRA Prohibited Conduct: Failing to use reasonable diligence to see that a customer’s order is executed at the best possible price, given prevailing market conditions. Read on FINRA Site
  • FINRA Rules of Fair Practice impose the following standard upon brokers: “A member, in the conduct of his business, shall observe high standards of commercial honor and just and equitable principles of trade. ” This standard, along with other FINRA rules, is legally enforceable and is the standard on which investors are supposed to depend.

THE SERVICE DISRUPTION

Trading is a risky business . Trading Options is even riskier . Trading options with Delayed level 2 Quotes is Suicide . An active trader can not  make money with lagging real-time quotes . I don’t know if I need to elaborate or explain how you can lose money but here is one way – lets say you want to get out of a position and you are trying to sell into the Bid of $2.00, your level 2 quotes show you a $2 bid so you sell at $2 but nothing happens so you wait and wait and wait , meanwhile the real time price is $1.75 . By the time your screen shows you $1.75 and you change your order, the real price may be $1.40 and so u keep chasing the option down not knowing why your order is not getting filled . You may also buy an option for $.80 when the real price is $.60 so that you lose almost 30% as soon as you buy . This is why a lot of times clients orders don’t get filled even though they believe that they may have tried to buy or sell at the bid and they may see the price on their screen going below their bid and nothing happens . The order probably did not go through because the bid/ask quote they used to put in their order is not the REAL TIME Quote. 

I started noticing problems with Command Center on April 16 2010 this was a Friday and it was options expiration . It was also the day that  Goldman Sachs was charged with Fraud by the SEC . The market was dropping but some of my streamer quotes had frozen and some of the quotes were just flat-out wrong, I was watching CNBC and I could see that the indexes were dropping but my streamer was frozen . I was basically trading blind . I really could not do much that day but I thought it was my computer or internet connection that was causing the problems .
 

As the days went by I eventually called Tech Support, the lines were usually busy but I was able to get through on a couple of occasions . I complained about the problems I was having with the quotes freezing and sometimes having totally wrong random quotes displayed . I was told to reinstall my Java and that it may be my ISP . I even asked if other people were calling in and they basically said No. I just could not figure out what was happening and even though I had called TD Ameritrade a few times nobody told me what the real problem was. By the time (1 month later) I realized what the bigger problem was I had already lost over $100,000 I  noticed that in addition to the other streamer problems like the quotes freezing or other website problems like not being able to log in , my level 2 option quotes were 2 to 3 minutes behind my level 2 stock quotes . I tried to call Tech Support but the lines were busy so I sent a message .

I did not get any reply from this message but I eventually called Tech Support again and someone suggested I use Think Or Swim . When I downloaded Think Or Swim I discovered that (To MY HORROR) the quotes I was getting from Command Center Streamer were wrong compared to Think Or Swim Quotes and that was the Primary reason for my loses . They knew the quotes were wrong but they just let me keep trading .

Before I knew about the lagging quotes I had considered borrowing $50,000 to wire into my account and keep trading . I would have lost all that money too because of this quote problem . The quote problem was never fixed . 4 months later when I asked Jeff Plummer why nobody ever contacted me about fixing the level 2 quote issue and why in August the issue had not been fixed, they shut my account down . They even shut down my wife’s account and told me not to bother ever applying to TD Ameritrade again . My opinion is they couldn’t fix the quote problem or did not want to fix it so they terminated my account so that I won’t be able to access Command center and the level 2 quotes ? How can anyone make money with a platform like this ? This is not an outage that lasted minutes or hours . This lasted for months ! If I did not figure out that my quotes were bad I may have deposited more money into my account and ended with more loses . The fact that they knew about the problem and refused to fix it baffles me .


 

MY LOSSES

I lost my income and my capital and the opportunity to make money and grow my capital . I have bills piled up and accumulating interest and late fees .

I trade for a living . This is how I make money to pay bills . This year 2010 from January to April before I got wiped out by the TD Ameritrade glitch I paid myself an average of $6,500 a month . I made over $100,000 in the first 3.5 months of the year – Jan, Feb, March and half of April . I have not made any money in the last 4/5 months because I have no money since I got wiped out by TD Ameritrade . I have also asked TD Ameritrade for $120,000 which is part of my capital that I lost due to a Software glitch that they were aware of and refused to do anything about . People trade to make money and not to lose money . To see my account balances go to the original letter I wrote TD Ameritrade .

CONCLUSION

An Outage/Glitch that lasts months is very very unacceptable . I would expect TD Ameritrade to do the right thing and take responsibility for this  Glitch just like the COO Dave Kelly said . No active trader can make money with a system that delivers wrong quotes every minute of every single day for months .

I would like TD Ameritrade to honor their company policy and make me whole by at least giving me back my $120,000,  because this loss was preventable . TD Ameritrade  knew about the lagging quotes and did nothing to prevent their clients from losing money . If clients had been notified about the bad quotes they could have minimized their loses .   Broker Dealers are bound by SEC laws and rules .

The Client Agreement that Jeff Plummer uses as an excuse to not be liable for the lagging quotes  is meant to be used when their are unforeseen technology issues like server failure or Network failure, hurricanes etc .. but not for well known technology issues  that they did nothing about . According to Section 29(b) of the Securities Exchange Act - the Client Agreement becomes void if a broker dealer violates sec laws . TD Ameritrade violated several SEC Anti fraud provisions that I listed above . The SEC Laws and FINRA Rules are superior to TD Ameritrades Client Agreement . In other words you can’t break the law and then try to protect yourself by saying that a client signed your agreement . That would be like putting a sign on a taxi that says NOT LIABLE FOR ACCIDENTS THAT OCCUR IF A DRIVER IS DRUNK .

I don’t want to deal with Jeff Plummer ( TD Ameritrade Compliance Manager ) anymore because he seems to be playing games . I have sent him over 10 mails asking him about making me whole per TD Ameritrades Company policy but he has NEVER acknowledged the policy or mentioned it in his correspondence  . This is a policy that TD Ameritrades COO talked about with DOW JONES .

I have sent 2 emails and 2 mails by courier to LISA HENOCH Chief Compliance Officer of TD Ameritrade but I am yet to hear from her . I want her to intervene in this case because I don’t have any confidence in the way Jeff Plummer is handling this case . If you know Lisa Henoch or any other executive at TD Ameritrade I would like you to forward this blog to them . All I want is for SOMEBODY to apply the company policy to me !

td ameritrade 10 million settlement

FINRA Fines Merrill Lynch $1 Million and Orders Restitution of More Than $320,000 for Failing to Provide Customers Best Execution in Non-Convertible Preferred Securities Transactions


FINRA Fines Merrill Lynch $1 Million and Orders Restitution of More Than $320,000 for Failing to Provide Customers Best Execution in Non-Convertible Preferred Securities Transactions

On April 16, 2013, FINRA announced that it fined Merrill Lynch, Pierce, Fenner & Smith Inc. $1.05 million for failing to provide best execution in certain customer transactions involving non-convertible preferred securities executed on one of its proprietary order management systems (ML BondMarket), and for failing to have an adequate supervisory system and written supervisory procedures in place. Merrill Lynch was also ordered to pay more than $323,000 in restitution, plus interest, to customers who did not receive best execution for their trades in non-convertible preferred securities. Additionally, FINRA has required Merrill Lynch to revise its written supervisory procedures regarding ML BondMarket best execution obligations within 30 business days.

In any customer transaction, a firm or its registered persons must use reasonable diligence to ensure that the purchase or sale price to the customer is as favorable as possible under current market conditions. FINRA found that Merrill Lynch had programmed a faulty pricing logic into ML BondMarket that only incorporated quotations published on the primary listing exchange for that non-convertible preferred security. As a result, in instances when there was a better quote on a market other than the primary listing exchange, that quote was not reflected on ML BondMarket. The firm instead executed 12,259 transactions in non-convertible preferred securities with its customers on ML BondMarket at prices that were inferior to the National Best Bid and Offer (NBBO).

FINRA also found that Merrill Lynch’s supervisory system relating to ML BondMarket was deficient in a number of respects. Merrill Lynch failed to perform any post-execution review of non-convertible preferred transactions executed on ML BondMarket to ensure compliance with its best execution obligations. The firm also failed to enhance its supervisory review of non-convertible preferred securities transactions executed on ML BondMarket despite the fact that several thousand of such transactions were identified on FINRA’s best execution report cards and it had received several inquiry letters from the staff.

In concluding this settlement, Merrill Lynch neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

- See more at: http://www.stockbrokerlitigation.com/finra-news/finra-fines-merrill-lynch-1-million-and-orders-restitution-of-more-than-320000-for-failing-to-provide-customers-best-execution-in-non-convertible-preferred-securities-transactions/#sthash.UoFPVhj0.dpuf

Upside to Wall Street’s Tech Glitches?


http://www.foxbusiness.com/industries/2012/09/07/upside-to-wall-street-tech-glitches/

 

Are the high-profile technical glitches experienced by firms like Knight Capital, Nasdaq and BATS actually good for the health of the capital markets?

Some experts think so.

The first major blowup came when alternative-trading firm BATS priced it IPO, only to withdraw it after a disastrous technical glitch. Then came Nasdaq OMX Group (NDAQ

) experiencing major system problems when it was inundated with orders for Facebook (FB) shares during the IPO. Most recently, a glitch at Knight Capital Group (KCG) caused chaos with stock trades, nearly bringing the firm down. 

Surely ugly for the companies involved, all of these issues are examples of what can go wrong without proper risk procedures in place. 

“What happened at Knight Capital will prove to be great for capital markets,” said Harpal Sandhu, co-founder and CEO of Integral Development Corp., a firm that develops risk management, analysis and foreign exchange trading software used by many different institutions, including major banks. “You better believe every firm like Knight Capital is looking at their systems and making sure things are in order.”

Sandhu believes that after a debacle along the lines of Knight Capital, everyone learns from it and, as a result, the marketplace gets stronger.

Wall Street firms are using computer systems to replace humans more than ever before, to be more competitive as firms get hammered by the economic downturn. These systems work more efficiently and faster than humans. More and more firms have entered the market to allow investors new avenues to trade stocks.  

Industry observers say what is so astonishing is just how quickly technology has been implemented in different areas within Wall Street firms. Entire firms that used to play a part in the market-making puzzle have been wiped out by technology and now the processes are done at the fraction of the cost and time.

“What we saw is equity automation really accelerate in the 2002 period as commissions came down dramatically,” said Brad Hintz, banking analyst at Stanford Bernstein. “Now we are seeing fixed-income become more automated.”

Morgan Stanley is reportedly looking to lay off several fixed-income traders and replace them with computers to cut costs, and Goldman Sachs has reportedly spent millions investing in new systems in the last few years. Goldman Sachs CFO David Viniar has publicly said that slightly more than 25% of all the firm’s employees are in the technology and IT space.  

“Most of the big banks and brokerages are spending 20-25% of their expense budget on technology,” said David Hilder, bank analyst for Drexel Hamilton.  “All of these tech problems and general failures of risk management have certainly caused every bank to think more intensely about operational risk.”

Another factor for more risk is that each of these firms has many different systems throughout, all of which need specific technology. And many are custom built, making it more difficult to keep compliance and checks in place.

“Frankly, there are so few of the large investment banks left, it doesn’t make sense to develop an off the shelf system to market to these banks,” said Hilder.  

In late 2009, the Securities Exchange Commission introduced the Market Access Rule to ensure financial firms have the proper risk controls in place. The rule requires brokers and dealers to have risk controls in place before giving customers access to the market. It requires brokers to place risk management controls and supervisory procedures in place to prevent erroneous trades.
The Market Access Rule was just being applied when Knight Capital’s technical glitch hit, causing sudden swings in stock prices and a surge in trading volume. The issue took almost an hour to be discovered and was ultimately stopped, but not before costing the firm $440 million. The mistake caused Knight Capital’s stock price to drop by 75% in just two days. 

Of the 140 stocks impacted, the SEC reversed trades in only six cases.

“The best thing the SEC did was to make Knight stick to those trades,” said James Angel, a finance professor at Georgetown University, and a director for Direct Edge, a computer-driven stock exchange in which Knight Capital is a shareholder. “That sends a very strong signal to every trading firm that they need to make sure nothing goes wrong, nothing fails.”

With new financial technology, regulators need to ensure that everyone in the market place has the right systems in place. But experts say it’s impossible to have every scenario covered.

“This is the nature of technology,” said Angel. “Mistakes will happen again, so we need to protect ourselves and when it happens we know how to deal with it.”

Basic trading programs monitor trading positions and profit and loss. When the system generates an order, if the order is larger than average, an alert is typically generated.  The solution towards better technology systems with good checks and balances is better risk management, experts say.

“These mistakes are a wake-up call and ultimately good for markets,” said Sandhu. “It forces firms to focus on operational risk management, focus on testing and the release test process.”

The fundamental culture shift is happening on Wall Street with more and more firms opting to bring in technology experts in leadership positions.  One recent example is the CME changing their leadership to focus more on technology.  CME CEO Craig Donohue, a lawyer by profession, was recently replaced by Lupinder Gill, the firm’s technology leader.

But not everyone is convinced automated computer systems are the answer.

“The firms that are going to win are the firms that are living and breathing technology,” said Sandhu.

Read more: http://www.foxbusiness.com/industries/2012/09/07/upside-to-wall-street-tech-glitches/#ixzz2OgMx03TE

Investigation into the Potential to Recover Thinkorswim Losses Continues


http://www.whitesecuritieslaw.com/2011/10/26/investigation-into-the-potential-to-recover-thinkorswim-losses-continues/

In August TD Ameritrade took the final steps to integrate the accounts from the acquired Thinkorswim into their trading network. When what was reported to be the final 250,000 customer accounts were integrated, TD Ameritrade admitted that they experienced some “issues.” A later report, also confirmed by TD Ameritrade, seems to indicate that issues related to the integration continued beyond a single incident.

The White Law Group has been working with damaged investors over the last several months to investigate potential securities fraud claims related to the integration problems. We have spoken to many traders who have experienced serious issues with their accounts resulting in significant losses.

Many of the damaged investors were trading in Thinkorswim’s Portfolio Margin Accounts. They report to have experienced difficulty on the Thinkorswim platform executing certain trades. Another common complaint has been that some traders have had issues with margin calls.

Many of these problems seemed to have happened in a similar time period, in early August, but reports indicate that problems with the integration of Thinkorswim into TD Ameritrade aren’t limited to just one period of time.

On September 30th a TD Ameritrade representative told Bloomberg that “We encountered some issues just after market open this morning that impacted some of our clients, particularly those on our Thinkorswim downloadable trading platform…”

TD Ameritrade emphasized that the problems were fixed by later that same morning, but some clients were not pleased. One trader told Bloomberg, “I’m going to have to look at alternatives because this is not reliable.” It is understandable for traders that need a reliable trading platform in order to make a living to be concerned with these issues.

The White Law Group continues to gather details related to these Thinkorswim and TD Ameritrade platform issues in order to best determine how to represent clients in recovering their losses suffered as a result of the problems.

If you are a Thinkorswim client that has experienced difficulties since the August integration with TD Ameritrade and would like to speak to a securities attorney about your potential to recover losses or have information that may help us better represent other traders please call our Chicago office at 312/238-9650.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.

FINRA Fines Citigroup Global Markets $2 Million for Errorneous quotes


http://www.finra.org/Newsroom/NewsReleases/2009/P118157

 

 

FINRA Fines Citigroup Global Markets $2 Million for Range of Trade Reporting

Violations

 

Firm Published Erroneous Quotations and Transactions at and Around Opening on a Quadruple Witch Expiration Friday

Washington, DC — The Financial Industry Regulatory Authority (FINRA) announced today that it has imposed a $2 million fine against Citigroup Global Markets for the erroneous publication of non-bona fide quotations and transactions at and around the NASDAQ market opening on a Quadruple Witch Expiration Friday; systemic Order Audit Trail System (OATS) reporting violations; fixed income transaction reporting violations; limit order display violations; and, related supervisory failures. These violations occurred in 2006 and prior years.

FINRA found, as a result of a referral from the NASDAQ’s MarketWatch Department, that Citigroup failed to properly monitor certain of its trading systems at the opening on June 17, 2005, a Quadruple Witch Expiration Friday. Quadruple Witch Expiration Fridays occur once each quarter, when stock index futures, index options, stock options, and options on stock index futures simultaneously expire.

These system failures resulted in the erroneous publication of approximately 6,800 non-bona fide transactions in more than 170 securities that the firm ultimately cancelled via Clearly Erroneous Petitions. The systems failures also resulted in the publication of thousands of non-bona fide quotations, which triggered executions by other firms at prices unrelated to the market value of the securities, requiring those firms to petition to cancel over 1,400 trades.

“Firms must establish and maintain operational controls and supervisory systems reasonably and effectively designed to ensure that their trading systems function correctly, especially on expiration days when price discovery is particularly important,” said Tom Gira, Executive Vice President of FINRA’s Market Regulation Department.

FINRA further found that Citigroup did not report approximately 6 million orders to OATS between Aug. 1, 1999 and July 10, 2006. From July 2002 through September 2006, Citigroup inaccurately reported or failed to report over 300,000 transactions to FINRA’s Trade Reporting and Compliance Engine (TRACE) and inaccurately reported or failed to report more than 480,000 transactions to the Municipal Securities Rulemaking Board.

In concluding this settlement, Citigroup neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA’s BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2008, members of the public used this service to conduct 11.6 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999.

FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through comprehensive regulation. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms; writing and enforcing rules and the federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities; and administering the largest dispute resolution forum for investors and firms.

AXA Rosenberg Settles Coding Lawsuit for $65 mln


http://sanfrancisco.ibtimes.com/articles/242154/20111102/axa-rosenberg-settles-coding-lawsuit-65-mln.htm

Money manager AXA Rosenberg and co-founder Barr Rosenberg agreed to pay $65 million to settle a lawsuit by investors who said they lost money after a computer coding glitch impeded the firm’s ability to manage risk.

Tuesday’s settlement came nine months after AXA Rosenberg, a unit of French insurer AXA SA , agreed to pay $217 million to cover client losses and a $25 million fine to settle related U.S. Securities and Exchange Commission civil fraud charges.

Barr Rosenberg in September accepted a $2.5 million civil fine and lifetime ban from the securities industry to settle his own SEC case.

According to court papers, programmers introduced the coding error in January 2007, exposing clients to excess risk and causing losses that would not otherwise have occurred.

The error was found in June 2009 but not fixed for five months, and then not revealed to clients until April 15, 2010, after the SEC had begun examining the problem.

In a filing with the U.S. DistrictCourt in San Francisco, lawyers for four pension funds leading the investor lawsuit said the $65 million settlement marks a “substantial recovery,” above and beyond the sum obtained by the SEC.

The settlement requires court approval. A hearing has been scheduled for Feb. 17, 2012.

Neither AXA Rosenberg nor Barr Rosenberg admitted wrongdoing in settling with the SEC.

AXA Rosenberg managed $29 billion of assets in June 2011, down from about $70 billion at the end of 2009, in part reflecting client withdrawals stemming from the coding error.

The case is In re: AXA Rosenberg Investor Litigation, U.S. District Court, Northern District of California, No. 11-00536.

What People Are Saying About TD Ameritrade on ConsumerAffairs.Com


Go Here to See what people are saying about TD Ameritrade  http://www.consumeraffairs.com/finance/ameritrade.html

Some Reviews Below 

On September 30th, 2011, TD Ameritrade’s trading platform failed during regular trading hours. There was no possibility to enter new orders nor the existing orders were getting executed. Trading was unavailable. My attempts to close some of the positions in the morning on September 30th, 2011 were absolutely unsuccessful due to TD Ameritrade’s system failure. Due to sharp market moves, some of my stock and option positions significantly decreased in value by the end of the trading session on September 30th, 2011. This ultimately resulted in a margin call. On October 4th, 2011, TD Ameritrade decided to sell out most of my stock positions to cover the margin call. That sellout resulted in loss of $54,000.00, which is a direct result of TD Ameritrade’s system failure on September 30th, 2011. 

Yuriy of Bronx, NY

TD Ameritrade has the most screwed up, error-filled statements I have ever encountered. They are ripping people off. There is absolutely no way they can’t be. On one of my statements, it says I lost $5006.92. I owned 1.85 shares at $23.15, with market value of $42.83. That is the extent they had right. The statement says I had unrealized gain (loss) of $50006.92. When I called to inquire about this and other discrepancies, they made up some nonsense about cost basis being wrong, which clearly isn’t. Basically, I cannot account for over $10000 loss to my account and neither can they. I will not use them anymore. Don’t deposit money with them. You will lose it.

Marie of drepae, UT

The balance of an account on opening should be the same, as it was on the previous day closing. Ameritrade never informs you of the value of your account on closing, and unless you have made a note yourself, you would never know if the amount showing next day is correct. On several occasions, I found out discrepancies with numbers reported between market closings and openings. When I reported this to Ameritrade, their representatives came up with unbelievable excuses; such as they don’t have account details on previous closings, or the account were affected by after hours trading.

Ameritrade representatives will never give you the telephone number or email of their compliance officer. Instead, they will ask you to contact their president’s email. Sometimes, when they are cornered, they pretend to put you on hold,and they never come back. They are also very unprofessional when it comes to legal matters, such as disposition of trusts or joint accounts. In many cases, I have experienced that they are have their agents calling parties involved, asking them to dump their partners in favor of Ameritrade consultants. If you have friends in joint accounts, expect a great deal of gossip and interference from these expert investment “sharks”.

Demetrius of Valencia, PA

Direct Edge Exchanges Hit With SEC Sanctions for System Glitches


 

The article below is from http://www.foxbusiness.com/industries/2011/10/13/direct-edge-exchanges-hit-with-sec-sanctions/

–Regulators say Direct Edge exchanges broke rules, made errors

–Millions of dollars in trading losses blamed on violations, says SEC

–Direct Edge says it is responding, takes exchange obligations seriously

(Updates throughout with additional detail on exchange incidents, background.)

The U.S. Securities and Exchange Commission on Thursday sanctioned electronic stock exchange operator Direct Edge for violations and mistakes that drove millions of dollars worth of trading losses, according to regulators.

Regulators charged that in November 2010 the company helped exchange members fix erroneous trades driven by its “untested computer code,” breaking transaction rules and Direct Edge’s own guidelines as an exchange, according to regulators.

In a separate incident last April, an employee error disrupted Direct Edge’s trading systems, which the company failed to remedy before millions in losses mounted for customers, regulators said in a statement Thursday.

The two stock exchanges run by Direct Edge, as well as its order-routing unit, were censured and agreed to take “remedial measures,” according to a notice from the SEC.

“Direct Edge was required to police not only its members’ conduct, but its own conduct as well,” said Robert Khuzami, director of the SEC’s division of enforcement, in a statement.

Direct Edge said it had formed a plan to respond to the issues, including “significant” investments in technology and staff.

“Our entire organization stands committed to these efforts and conducting ourselves as a model exchange operator,” representatives of the company said in a separate statement.

Based in Jersey City, N.J., Direct Edge runs the newest of the 13 full-fledged stock exchanges operating in the U.S., having converted its electronic platforms to exchange status in July 2010. Its EDGA and EDGX platforms account for approximately 9.9% of daily trading in domestic shares this month, according to data from BATS Global Markets.

The company is about one-third owned by the International Securities Exchange, the U.S. options unit of Deutsche Boerse AG (DBOEF, DB1.XE). Trading firms Knight Capital Group (KCG) and Citadel LLC also own stakes, along with Goldman Sachs Group Inc. (GS) and JPMorgan Chase & Co. (JPM).

The Nov. 8, 2010 mishap arose from a software update that included a bug. If a member firm of the exchange happened to include a decimal point in the field for the quantity of shares intended to be bought or sold at Direct Edge, the number of shares transacted wound up far higher than the intended amount.

Three firms fell victim to the error. While one submitted a loss claim for $105,000, which Direct Edge honored, the other two refused to accept the positions–about 27 million shares’ worth of 1,000 different stocks–and turned them over to the exchange operator, where officials opted to trade out of the position over a period of days using the company’s internal broker unit, used to route trades to other markets.

That trading violated Direct Edge’s exchange rules, and initial uncertainty over the total size of the position resulted in some transactions being incorrectly marked, breaking some regulations around short-selling. Direct Edge lost about $2.1 million on the trading, according to regulators’ findings.

On April 13 of this year, an employee updating Direct Edge’s databases made an error that took down the company’s EDGX platform beginning at about 3:19 p.m. ET and lasting until the end of the session. For 24 minutes, the exchange continued to broadcast quotes to public data feeds, violating federal rules, and several members filed loss claims for more than $668,000, regulators said.

The firm cooperated with the SEC probe and agreed to settle cease-and-desist and administrative proceedings without admitting or denying fault in the matter, according to regulators. Direct Edge has boosted risk management and technology controls in response.

Other exchanges have fallen prey to similar mishaps over the past year. In September 2010 futures exchange company CME Group Inc. (CME) briefly submitted about 30,000 “test orders” into the live market, and CME paid about $4.7 million to compensate customers.

Nasdaq OMX Group Inc. (NDAQ) paid out roughly $3 million after a software glitch in April fed incorrect prices to trading firms and halted business in more than 80 securities.

Copyright © 2011 Dow Jones Newswires

Read more: http://www.foxbusiness.com/industries/2011/10/13/direct-edge-exchanges-hit-with-sec-sanctions/#ixzz1bdQ6ezvM

The article below is from  http://www.fiercefinanceit.com/story/sec-sanctions-direct-edge-faulty-systems-controls/2011-10-15

The SEC has taken Direct Edge to task for two snafus that revealed weaknesses in order processes and compliance, resulting in million of losses by trading clients.  The exchange has agreed to a battery of remedial measures, without admitting or denying guilt. The two incidents:

  • On Nov. 8, 2010, untested computer code changes resulted in EDGA and EDGX overfilling orders submitted by three members. The unwanted trades involved an estimated 27 million shares in about 1,000 stocks, totaling roughly $773 million. At the exchanges’ instruction, one member traded out of the overfilled shares and submitted a claim of $105,000 of losses. “When the other members refused to do likewise, the exchanges assumed and traded out of the overfilled shares through the routing broker’s error account, in violation of their own rules.” The SEC also found that in resolving the overfilled trades, which cost the exchanges about $2.1 million, DE Route “failed to mark the orders as short or mismarked them as long, and failed in its Regulation SHO obligation to ascertain if shares were available to borrow.
  • On April 13, 2011, an EDGX database administrator inadvertently disabled database connections, disrupting the exchange’s ability to process incoming orders, modifications, and cancellations. Several EDGX members to file claims for more than $668,000 in losses. “EDGX received internal alerts immediately and got external notifications soon after,” including from members seeking to cancel unfilled trades and from numerous trading centers that were bypassing EDGX. EDGX waited 24 minutes after the outage to remove its quotations from public market data, and violated the Regulation NMS “by failing to immediately identify its quotations as manual quotations.”

The agreed-upon remedy involves basic GRC practices. The firm has among other things agreed to implement an ERM framework and an information security program. It will hire an information security director, a corporate training director, and a chief compliance officer. In addition, it will enhance their systems to prevent recurrences.
See Case Document on SEC’s Site  http://www.sec.gov/litigation/admin/2011/34-65556.pdf

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