"Trade Inquiry 221559066190 on order 108 to sell 500 shares of IBM has been reviewed. E*Trade Financial follows common industry practice to expire orders 20-25 minutes after the close of the market. This is done in the event that an order was executed but had a delay in the reporting. You may call us before the order is expired to request that we manually remove the order, but that is the responsibility of the customer. No adjustment is due on order 108, and we cannot offer any compensation for orders that were rejected correctly."
I just wish I knew this rule yesterday. It would have saved me a lot of money. What really pissed me off is that it took over 10 minutes for the customer service rep to look up my account when I called yesterday. If they had been quicker it would have saved me at least $1.5K. Well, I guess this is a very expensive lesson not to ever use etrade again and never place a "day" order. Just curious is this truly common industry practice to lock orders for 20-25 minutes after the market closes?
Why you place this trade in first place? Seems like very bad risk vrs reward. I hope you learned lesson that is valuable. Very sorry.
Quote from tradermike88:
I bought 500 shares of IBM about 5 minutes before the close at $99.45. I then placed an order using their "auto" ecn to sell these 500 shares at $99.65. I was trying to make a play on the volatility from the earnings release afterhours. A few minutes after the market closed I cancelled the order to sell the 500 shares at $99.65 because I wanted to make sure that INET was used as the ECN. I then tried submitting my INET sell order several times and it got rejected saying I did not own the shares to sell. I looked at my original order and it was frozen as pending to cancel. I tried to cancel it repeatedly and during that time the earnings came out. I tried cancelling it and repeatedly submitting sell orders, but it was frozen for about 10 minutes at this point. I then got called etrade in a panic and evenutally got throught to their trade desk. Finally, after being put on hold for 10 minutes the trade desk rep came on and said he had killed the original order so that I could now sell my shares. I said "are you kidding". My order has been frozen for 20 minutes & this cost me $2,500. He agreed that it was their fault that the order froze and I could not sell my shares for 20 minutes and said he would file a trade dispute. Has anyone had similar experiences? I am really upset about this situation and don't know how to proceed. They said they will get back to me in 24 hours. I am wondering what happens in these circumstances usually. Is it possible that the market maker who was given the order to sell my shares held off on cancelling it so they could fill it if the price shot up and leave me hung out to dry if it crashes?
Your doing a 1000 trades a year? How many shares at a time? That many trades sound like you are day trading more than swing trading. What are you paying in commissions on each trade?
Like I said earlier, you need to not only Google the terms I mentioned before, you need to ask each new prospective broker what happens to your order once you click the buy/sell button.
Sorry to say, but you really don't have any leg to stand on. I can tell you did not follow my advice from earlier and read up on how ETrade handles orders but are slowly picking up that knowledge.
ETrade and other brokers (that are not direct access) route all orders to market makers. It is in their best interest to obtain the stock at a better price and make a little extra. After all they have to kick back a little bit to the broker so to be able to pay for that order. Hence the term "payment for order flow".
Listen, we can list all of the pitfalls in this business but it wouldn't do any good. We each have to experience them in order to really learn from these errors.
Okay, you may have read it's best to go with a direct access broker, but you are looking at the cheap commissions and the features etc and felt that was the best deal for you. And it probably was, until you found out the one trade that can bite you in the butt. There are many others believe me (speaking as an ex ETrade customer).
Good luck finding a new broker should you determine that's in your best interest.
Sorry for your experience. Interesting thread. I don't think you were jobbed by a "market maker". Your cancel request was DOA.
Here's what likely happened:
E*Trade routed your order (I assume a DAY order) before the close to either a regional stock exchange or a "third market" - an agency broker who trades order flow. Search "order routing" on E*Trade's website, click the active trading link, and look at their quarterly 606 report - that tells you where they route orders and to what percentage. To my knowledge, E*Trade is not an NYSE member firm, and does not route directly to the NYSE. Regardless, no specialist, market maker, or trader has responsibility for a cancel requested on an expired DAY order.
DAY orders expire at the end of the regular trading session.
Your cancel is a request to cancel the order - E*Trade's system waits for a "UR OUT" message from the exchange or other counterparty before it moves from a "pending" state to cancelled. In other words, your cancel is not instantaneous - it must be acknowledged by the destination which received your order. This is actually a fairly common practice - during volatile times in the market, many orders are partialled or filled and a rapid-fire penny chaser could quite easily get a TLTC (too late to cancel) execution, which would result in reinstating the original order, and disregarding the cancel request entirely - can be a messy chain of events. Check with E*Trade to see if your cancel was actually sent to the exchange or third market, or if they stop sending order messages after the close. Even if sent, it was probably unprocessed by the recipient, since it was sent after the close. In any event, with the market closed, this probably resulted in what you call "frozen". The E*Trade rep most probably manually "OUTed" your cancel.
Most exchanges and other venues close their regular session at 1600 hours and open a separate "after hours" session. Not all destinations allow you to specify an order which is valid for all or multiple sessions during a given day. You will have to check with E*Trade if this is accommodated by their trading partners or not. You will also have to check whether this option is available to you via their software - I do not use them as a broker.
After the regular session closes, most venues run a batch process which sweeps their order book and sends "ADDS and OUTS". ADDS are GTC orders added to the book today. OUTS are expired DAY orders. Since your order was received prior to the close, and not executed, then it probably was sent on the OUTS section of this recap. Check with E*Trade. It can easily take up to 20 minutes for all of this activity to be received and processed by E*Trade - that's not entirely under their control, either, they are dependent upon the time their trading partners take to complete this process.
E*Trade's system has a rules engine to prevent inadvertant (or illegal) short sales from occuring. Your long position was paired off with your sell order, resulting in a "net zero" position ("I did not own the shares to sell"), which was why you could not enter another SELL order. (I wonder if you could have entered SELL SHORT, and "beaten the system", but those are also probably manually reviewed. You obviously would not be short overnight and E*Trade might have had some funny looking ledgers which they'd have to clean up themselves.)
The upshot is, your cancel was in no-mans-land. E*Trade's system considered your order (which was technically expired if DAY) still in effect, which disallowed any other SELL activity.
My credibility? E*Trade once used a system I wrote for all of their order processing. I wrote the links to their system and to all of the exchanges, market makers, and agency brokers, as well as the order matching engine. I can't state with assurance that my explanation above is gospel, since they no longer are a client of my firm's services, but that's how these events are commonly sequenced in the market.
It will be up to you to determine whether E*Trade is culpable or not. Markets have defined hours of trading, and some post the rules regarding these trading sessions on their websites. Your best course of action, in my opinion, is to ask E*Trade what their recommended procedure is for a customer to perform when this condition occurs. If they cannot give you an answer (which is different than an "explanation"), then you may have a valid claim that their software is not suited to the clients they court (you drive commission dollars into them). Advise them that post-market-hours cancels on regular-session orders should be either disallowed, with the original order marked "expired", or immediately "OUTed", so that your desired order can be placed.
Good luck with your claim. Please post your result.
Great explanation. Most of us have learned these lessons the hard way. The brokers do a terrible job of explaining this sort of pitfall. I have little doubt that your explanation is correct, but I doubt Etrade will tell a customer he lost 2500 because his order fell into a no-man's land their software creates.