Best Broker for OTC stocks - I need a recomendation

[NoCalledStrikes]

I just got a call from Merrilledge an hour ago telling me that effective August 1, I will no longer be allowed to buy stocks under $5 or under $300 million USD market cap.  They claim this is a SEC rule and no brokers will be allowed to let their customers buy micro-cap stocks ever again, but that strikes me as absurd. For starters, if no one is allowed to buy, who would we be allowed to sell our existing positions too?

 

This is part of a trend as For the past two years, I've had problems buying OTC stocks at Fidelity and TD Ameritrade, but no problems at Merrilledge and so have been using Merrilledge almost exclusively for legitimate (non-penny) OTC stocks.  For instance, Fidelity won't let me buy LICT which sells for $13,900/share. They apparently consider it a penny stock, so I bought it at Merrilledge.  In my experience, TD Ameritrade also refuses opening orders for most OTC stocks (in the past, they just required you to place them by phone).

 

Anyway, I am in need of a broker for an IRA which will let me buy OTC listed securities which market caps under $300 million.  Any suggestions?

[SnarkyPuppy]

Etrade,  interactivebrokers

[muscleman]

I just got a call from Merrilledge an hour ago telling me that effective August 1, I will no longer be allowed to buy stocks under $5 or under $300 million USD market cap.  They claim this is a SEC rule and no brokers will be allowed to let their customers buy micro-cap stocks ever again, but that strikes me as absurd. For starters, if no one is allowed to buy, who would we be allowed to sell our existing positions too?

 

This is part of a trend as For the past two years, I've had problems buying OTC stocks at Fidelity and TD Ameritrade, but no problems at Merrilledge and so have been using Merrilledge almost exclusively for legitimate (non-penny) OTC stocks.  For instance, Fidelity won't let me buy LICT which sells for $13,900/share. They apparently consider it a penny stock, so I bought it at Merrilledge.  In my experience, TD Ameritrade also refuses opening orders for most OTC stocks (in the past, they just required you to place them by phone).

 

Anyway, I am in need of a broker for an IRA which will let me buy OTC listed securities which market caps under $300 million.  Any suggestions?

 

What? This is unheard of. I switched from IB to TD Ameritrade last November and have been buying OTC stocks with no problem. Their flat fee costs much less than the per share commission in IB. Are you saying that you can't buy OTC stocks in TD Ameritrade?

Note that a few months ago IB issued an article to ban customers from buying certain otc stocks trading in the grey market.

 

[OracleofCarolina]

anyone know what SEC rule has the brokers acting bonkers? Mine changed earlier this year and only allows stocks trading on NYSE or NASDAQ and before that I could buy anything OTC.

[NoCalledStrikes]

Muscleman - Very interesting, I just tested 4 microcaps on TD Ameritrade and they accepted my test orders for all of them.  Since I entered them after hours, I wonder if I had entered them during trading hours if they would have cancelled them as they often put my small cap orders on hold before releasing them during market hours. TD Ameritrade is often very picky with me, so I had given up trying the past 6 months or so for low liquidity stocks, but perhaps they've changed (I will test during market hours before I call this a permanent change).

 

I tried my Fidelity account and most of my OTC's were going through, but it wouldn't accept orders for Alpha Natural Resources (AANR and APNR) and Solitron (SODI) "Error:(TC9052) Opening transactions for Pink Sheets (without information) are not permitted because of the risks associated with these securities and all Microcap securities." But they would take LICT which they most definitely did not accept several months ago.

 

The brokerage rules on this are so nonsensical.  I would love to consolidate accounts, but it seems like I have to have multiple accounts if I want to be able to trade obscure stocks since there is no way of knowing who will let you trade which stock.

[rkbabang]

Muscleman - Very interesting, I just tested 4 microcaps on TD Ameritrade and they accepted my test orders for all of them.  Since I entered them after hours, I wonder if I had entered them during trading hours if they would have cancelled them as they often put my small cap orders on hold before releasing them during market hours. TD Ameritrade is often very picky with me, so I had given up trying the past 6 months or so for low liquidity stocks, but perhaps they've changed (I will test during market hours before I call this a permanent change).

 

I tried my Fidelity account and most of my OTC's were going through, but it wouldn't accept orders for Alpha Natural Resources (AANR and APNR) and Solitron (SODI) "Error:(TC9052) Opening transactions for Pink Sheets (without information) are not permitted because of the risks associated with these securities and all Microcap securities." But they would take LICT which they most definitely did not accept several months ago.

 

The brokerage rules on this are so nonsensical.  I would love to consolidate accounts, but it seems like I have to have multiple accounts if I want to be able to trade obscure stocks since there is no way of knowing who will let you trade which stock.

 

I own a number of penny stocks in Fidelity account, but I ran into this for the first time this week trying to put an order in to buy HAUP, it gave me the same reason as above “Pink Sheets without information”.

[LC]

https://www.sec.gov/fast-answers/answerspennyhtm.html

[NoCalledStrikes]

LC - I like how LICT corporation at $13,900 a share, a 30 year operating history, and nice financials posted on its web site is considered a speculative investment, buy you can buy all the Tesla you can want for your IRA with the SEC's blessing. All I want is to sign a form saying I am a big boy and won't sue if you sell me exactly what I ordered at the price I offered to buy it at.

[shhughes1116]

I've used E*Trade for quite some time to buy OTC stocks.  In general, I haven't had any problems.  Every now and again, when I place an online order for a thinly traded stock or a penny stock, the online ordering platform will prompt me to call E*Trade to speak with a broker in order to complete the order.  The broker can see the order you tried to place and will complete the order for you.  In these cases, the higher fee for broker-assisted orders are waived and you pay the online fee.  Early on, they would ask a few questions - I think to make sure I wasn't crazy or an idiot.  Now, they don't ask any questions, they just confirm what I wanted to order, and then place the order for me, which I assume is the result of seeing that I have done this in the past without losing my shirt. 

[NoCalledStrikes]

The new banner message from Merrill Edge today:

 

Effective July 31, we have updated the terms and conditions of our Online brokerage as well as the definition of low-priced securities.

 

Note: Open orders may be canceled for purchases of securities that do not meet the guidelines for low priced securities. This is an opening transaction that will no longer be permitted as part of the changes to our low-priced security policy. Please contact us with any questions.

 

Important Information Regarding Low Value Securities

Due to the risks related to low-priced securities (LPS), the Firm has special restrictions on orders in low-priced securities.

 

A "low-priced security" is generally defined as having any of the following traits:

 

Securities that trade over-the-counter (OTC) at or below $5-per-share and/or less than or equal to $300 million in market capitalization

Securities labeled as Caveat Emptor by OTC Markets Group

OTC securities that have limited or no financial disclosure information available

Purchase orders in certain securities meeting the LPS definition will not be permitted.

[Spekulatius]

Fidelity will not allow orders ( except selling existing positions) for OTC stocks which do not post financials with the SEC, even if those companies post financials on their website. Similar with Wells Trade.

 

I used to have Etrade account which could buy anything a few years ago, but I don’t know if that’s still the case. IB lets you buy almost anything OTC but there are a few stocks which for one reason or another, don’t show up in their “ product” using search etc list and hence can’t be traded.

 

The $300M market cap minimum strikes me as arbitrary and if I would deal with microcaps a lot , I would just move to another broker.

[NoCalledStrikes]

Merrill edge just cancelled my outstanding buy orders for CNTWW, WEDXF,  SPCO.

 

Nothing says we don’t want you as a customer like cancelling your open orders.

[Jurgis]

https://www.sec.gov/fast-answers/answerspennyhtm.html

 

Looking at this, it might be that most (all?) brokers will join the club of not allowing the purchases of "penny" stocks:

 

Because of the speculative nature of penny stocks, Congress prohibited broker-dealers from effecting transactions in penny stocks unless they comply with the requirements of Section 15(h) of the Securities Exchange Act of 1934 ("Exchange Act") and the rules thereunder. These SEC rules provide, among other things, that a broker-dealer must (1) approve the customer for the specific penny stock transaction and receive from the customer a written agreement to the transaction; (2) furnish the customer a disclosure document describing the risks of investing in penny stocks; (3) disclose to the customer the current market quotation, if any, for the penny stock; and (4) disclose to the customer the amount of compensation the firm and its broker will receive for the trade. In addition, after executing the sale, a broker-dealer must send to its customer monthly account statements showing the market value of each penny stock held in the customer's account.

 

I'm pretty sure no brokers want to go through the hassle of (1) for each transaction. They may not want to do the other points either.

 

Of course, YMMV, some brokers may continue to offer the purchases without enforcing (1), etc.

[winjitsu]

Merrill edge just cancelled my outstanding buy orders for CNTWW, WEDXF,  SPCO.

 

Nothing says we don’t want you as a customer like cancelling your open orders.

 

CNTWW was the stock that prompted some broker soul-searching for me too.

 

On fidelity, you can buy CNTWW but not CNTE. They won't let you buy microcaps with no financials, though their warrants are totally fair game.

On IBKR, you can buy CNTE but not CNTWW. CNTWW trades on some grey sheets that IBKR does not have access to.

 

I think my only solution is to have several brokerages accounts open (I have Schwab and Etrade as well) and to shuffle around money to whichever broker will allow me to execute.

 

 

[oddballstocks]

Talked to IB today.  Anything considered "grey market" is forbidden.  I tried to place a few test trades, no dice.  But other otc stocks (CCRK) without financials they're ok with.

 

I believe grey market, and eventually otc stocks are a dead market.  The SEC is working fast to kill it.

[JanSvenda]

Penntrade for the grey- http://www.nonamestocks.com/2017/05/ive-moved-to-penntrade.html

[Guest Schwab711]

Talked to IB today.  Anything considered "grey market" is forbidden.  I tried to place a few test trades, no dice.  But other otc stocks (CCRK) without financials they're ok with.

 

I believe grey market, and eventually otc stocks are a dead market.  The SEC is working fast to kill it.

 

I think OTCQB/OTCQX will eventually be the OTC market. Current pink sheets will be around for some time though. I agree the grey market is as good as dead. It's the fault of any company that isn't labeled "Pink Current Information". Instead of posting their financials on their website (or mailing annual reports to investors), they could submit them to OTCM and you'd be fine to trade their security. OTCM accepts hand-written financials if you are a real penny-pincher. There's no excuse to be "No Information" or the like unless you are planning or actively trying to screw your shareholders.

[Spekulatius]

Talked to IB today.  Anything considered "grey market" is forbidden.  I tried to place a few test trades, no dice.  But other otc stocks (CCRK) without financials they're ok with.

 

I believe grey market, and eventually otc stocks are a dead market.  The SEC is working fast to kill it.

 

I think OTCQB/OTCQX will eventually be the OTC market. Current pink sheets will be around for some time though. I agree the grey market is as good as dead. It's the fault of any company that isn't labeled "Pink Current Information". Instead of posting their financials on their website (or mailing annual reports to investors), they could submit them to OTCM and you'd be fine to trade their security. OTCM accepts hand-written financials if you are a real penny-pincher. There's no excuse to be "No Information" or the like unless you are planning or actively trying to screw your shareholders.

 

You got that right. You either don’t want other shareholders, or you want to screw them.

[bianji108]

does anyone has experience buying non-dtc stocks without incurring large fees? scottrade used to allow basically everything I wanted. but since they are acquired by TD, a few stocks I wanted to buy are not allowed there...and apparently IB doesn't allow them (close only or not showing up)

[maybe4less]

Merrill edge just cancelled my outstanding buy orders for CNTWW, WEDXF,  SPCO.

 

Nothing says we don’t want you as a customer like cancelling your open orders.

 

CNTWW was the stock that prompted some broker soul-searching for me too.

 

On fidelity, you can buy CNTWW but not CNTE. They won't let you buy microcaps with no financials, though their warrants are totally fair game.

On IBKR, you can buy CNTE but not CNTWW. CNTWW trades on some grey sheets that IBKR does not have access to.

 

I think my only solution is to have several brokerages accounts open (I have Schwab and Etrade as well) and to shuffle around money to whichever broker will allow me to execute.

 

FWIW, I have US accounts and was able to buy CNTWW at IB and CNTE at Fidelity.

[winjitsu]

 

FWIW, I have US accounts and was able to buy CNTWW at IB and CNTE at Fidelity.

 

This is really good to know, thanks! I tried this last Spring / Summer 2017, but since they filed financials + and have the pending merger, not surprised that things have changed.

 

AFAIK Fidelity hasn't changed their rules though regarding pink sheet stocks w/ no financials (which in many re-orgs will be the case).

[Mondegreen]

Could you confirm you had to place a minimum order of 100 when purchasing CNTWW?

 

$33.00 * 100 = $3,300

 

Bit of a large position in the warrants (for me), though I do think that they are the best way to play Contura

 

Thanks,

Mondegreen

[muscleman]

NoCalledStrikes, how's your experiment with TD AM going? I haven't had any problems with them for a few otc stocks that I own. (NJMC, ATGN, TSSI, QUES etc.)

[maybe4less]

Could you confirm you had to place a minimum order of 100 when purchasing CNTWW?

 

$33.00 * 100 = $3,300

 

Bit of a large position in the warrants (for me), though I do think that they are the best way to play Contura

 

Thanks,

Mondegreen

 

I believe this was the case at IB, but not at other brokers (Schwab and Fidelity).

[Gamecock-YT]

Looks like they’ve extended it to sell orders now...delay in execution to review the order. Ugh.