- A surge in trading led to more outages at several major online brokers
- Schwab's takeover of TD Ameritrade received a key approval
- thinkorswim launches a web version of its powerful trading and analytical platform
- Two brokers are offering rebates for trades placed on their platforms
- A new exchange for futures traders opens
- Baby boomers nearing retirement can use a new app to estimate income and lower expenses
While bullish retail traders continued to place online transactions at a record pace amid a historical rally for stocks, online brokers and fintech developers are rolling out new products and features. Early statistics for trading in May show continued trading surges compared to the same month in 2019, though they are flat compared to April.
More Outages on Big Trading Days
A surge in trading the morning of June 5 caused a number of problems for online trading platforms, peaking around 9:30AM Eastern time. Downdetector reported issues at Charles Schwab, E*TRADE, Fidelity, Merrill, Robinhood, and TD Ameritrade. On Twitter, customers of M1 Finance, and thinkorswim were complaining. Customers who lodged complaints with their brokers on Twitter were asked to call support lines.
It is odd to see so many brokers suffer simultaneously when the market circuit breakers have not been tripped. These brokers do not share clearing firms; most are self-clearing. An M1 spokesperson tells us on Twitter, "We had a high and unusual burst of traffic this morning, which may have caused issues for some people. We're currently working with anyone who was affected." A TD Ameritrade spokesperson reports via email, "Sheer volume of messaging. We had delays for about 4 minutes of orders which were executed but messages were slow." From Schwab, we were told, "Due to a technical issue, we experienced a delay in reporting trades for a small number of clients this morning. This was a reporting delay (not trading) and we worked rapidly to remedy the situation."
Thinkorswim for Web Launched.
In late May, TD Ameritrade launched a streamlined version of its downloadable platform, thinkorswim (TOS), which runs in a web browser. This version has been in development for nearly two years and supports both live trading and papermoney, a trading simulator. The web version of TOS is connected to all the same data sources and trading engine as the desktop version and includes the same watchlists, including dynamic watchlists which update automatically as stocks pass the filters.
Harrison Napper, senior product manager for thinkorswim at TD Ameritrade says, “We want people to be able to use TOS regardless of device.” Napper notes that TOS web works on phones, tablets, or desktop computers and that TOS itself is one big ecosystem. Napper says, “We focused on the transactional pathway and built our process in a way to adapt to feedback rapidly. We’re getting the bones out to customers and are asking them to help us evolve based on their needs.” As customers ask for additional capabilities, including studies for the technical charting package, Napper says that those items can be added.
“One of the reasons it took a while to bring this out was the challenge of managing the data,” Napper says. When you refresh the page, it reloads the entire application. The team has done a lot of work on lightening the data payloads and the weight of the application itself. The tech team had to invent some technology to tie together the front-end, the data feeds, and the trading engine. During a brief hands-on test, we found the web platform very responsive and suitable for quick trading tasks and checking on balances. The analytical power of the desktop platform is still the place for long analytical and trading sessions.
Schwab Takeover of TD Ameritrade Clears Hurdles.
On June 4, 2020, shareholders of Charles Schwab approved the proposal to acquire TD Ameritrade. At a separate meeting the same day, the shareholders of TD Ameritrade approved the acquisition. Both groups of shareholders offered very little resistance to the merger, with less than 1% at the meetings voting in opposition.
Earlier in the day, the Department of Justice gave Charles Schwab antitrust approval for the acquisition. There were concerns about the concentration of advisor-managed investments since the merger would result in over one-third of the registered investment advisor custody market under one roof. All that remains to proceed with the takeover are some additional regulatory approvals. The buyout is expected to be completed in Q4 2020.
Two brokers, one that is new, are offering to share the revenue that they generate from payment for order flow with their customers.
SogoTrade has introduced a new pricing structure as well as a program called “Get Paid To Trade” which launches Friday, June 5, 2020. Commissions on equity limit orders are being cut from $4.88 to $0, plus orders that add liquidity will earn $0.001 per share on a minimum order size of ten shares. This is a unique program structure.
As part of this program, SogoTrade introduced a new order type that appears on the order entry screen as GP2T (Limit). This order type sets up a limit order that defaults to a penny away from the market which the customer can change to up to $0.05 away from the market price. If the order is considered to add liquidity to the market, you’ll see the credit that your order will generate once it executes. The order status page has a new column with the header “GP2T” that is highlighted in green if you have working orders if a credit is pending.
It can be difficult for a beginning or intermediate trader to know in advance if an order is making or taking liquidity, but SogoTrade’s order entry process tells you right away if your current order qualifies for the credit. Kristopher Wallace, CEO of Asset Management at SogoTrade says, “We’ll make less money by revenue sharing, but we think we’ll be attracting new business and will make it up in volume.” Wallace says that SogoTrade wants to be competitive in a zero-commission world and that this is a simple way to get to a rebate compared to some other brokers that share rebates.
All Of Us, a San Francisco-based firm that opened its virtual doors in late May 2020, is offering to share revenue generated by their financial relationships with market makers with clients, and also automatically enrolls everyone in a fully-paid securities lending program. All Of Us pledges to credit customer accounts with $0.0001 per share traded (minimum price of $1 per share) on the day after a trade is executed. Customers who have stock that gets loaned to short sellers will be credited monthly with 30% of the revenue that the brokerage is paid by its clearing firm, Apex Clearing. Stock trades are commission-free and margin interest is 5.75%, which is below average.
All Of Us has a website as well as iOS and Android mobile platforms. At launch, only stocks and ETFs can be traded, but the firm says its roadmap includes adding retirement accounts, mutual funds, equity options, and bonds over the next couple of years. The order may vary depending on customer interest. All of Us is registered in 47 U.S. states and the District of Columbia but is not yet registered in Illinois, Massachusetts, or Missouri.
Of these two offerings, SogoTrade's is ten times as generous with the rebate.
A New Exchange for Futures
The Small Exchange, a futures exchange offering smaller, simpler products aimed toward retail customers, launched on June 1. This exchange has been in the works for a couple of years as the developers have refined the process of building, pricing, and trading the products.
At launch, there are three Smalls available that cover stocks, the US Dollar, and precious metals. The Small Stocks 75 Index is comprised of 5 equally weighted sectors with each sector containing 15 stocks. These sectors include information technology, industrial, energy, financials, and materials. Small US Dollar is priced directly to the dollar, and it spreads USD exposure across the Euro, Chinese Renminbi, Japanese Yen, British Pound, Canadian Dollar, Australian Dollar, and Mexican Peso. Small Precious Metals combines and weights the three most popular metals by global production, US consumption, and trade volume. Next up in the product queue are Smalls that cover 10-year treasuries and the global oil market.
The contracts are designed to be uniform and move in 0.01 increments that equal $1, expiring on the third Friday of every month. The Small Exchange is the brainchild of financial network tastytrade, and the products are available to trade now at tastyworks, Tradovate, and Gain Capital, among others. Interactive Brokers, which recently made an investment in The Small Exchange, will offer the Smalls in the near future. Tastytrade has a free course that describes what the products are and offers practical examples of trading.
Dough Adds Options Trading
Dough, a commission-free iOS and Android app-centric online broker that launched last summer, recently rolled out options trading to its customers. To qualify, you must have at least a $2,000 balance.
The brokerage is helmed by Victor Jones, who had a 12-year tenure at TD Ameritrade and thinkorswim, and was TD's director of trading and operations. Dough itself is part of the tastytrade family. Jones is enthusiastic about educating new investors and traders, so the platform is loaded with short videos explaining recent market changes and investing concepts. The order entry ticket defaults to a limit order, which Jones encourages. Jones, a millennial himself, says his generation wants to develop a deeper understanding of the markets, and describes dough as, "a long-term relationship for a generation of investors to help understand risk and strategy through a new business model."
You can open an account at dough without making a deposit, and access all of the platform's content at any time. New unfunded accounts have 15 days of free real-time quotes; if still unfunded, the quotes revert to delayed.
New App for Baby Boomers Nearing Retirement
Kindur, an SEC-registered investment advisor dedicated to helping retirees feel prepared moving into retirement, recently released the Silvur app, designed to help baby boomers and others avoid outliving their money. At launch, it's an iOS-only app, but there will be an Android version available soon. Silvur leverages another Kindur-developed piece of technology, SmartDraw, to estimate baby boomers’ financial picture throughout retirement with the goal of providing awareness of potential financial pitfalls.
The app is free to download and use, generating revenue through affiliate partnerships, which users can take advantage of if they so choose. Silvur has partnered with a variety of consumer brands, including Uber Eats, Hulu, wine.com, and others, that offer rebates which are deposited into users' bank accounts. Silvur is adding new partners every week, including financial services such as home refinancing, credit cards, home and auto insurance, wills preparation, and income tax filing.
Silvur calculates required minimum distributions (RMDs) from traditional IRAs, which is changing all the time, especially through the various relief packages that have been passed by Congress during the pandemic. The interface is designed to create a guidedexperience. Each step is carefully laid out and in a hands-on test, I didn't run into any spots where I had to figure it out on my own. If you're over 55, this app is extremely useful and does a good job of walking users through the process of planning for retirement.