Grand Larceny?
REPORT to The Wall Street Jovial: SEC and E*Trade Do Not Think This Is Grand Larceny...Do You?
E*TRADE Securities Inc.
Rebecca Watson - Compliance Officer
PO Box 989030
West Sacramento, CA 95798-9030
Re: SEC HO#250836
E*TRADE Account # XXXX-XXXX
Ms. R. Watson,
I am in receipt of your company's response dated 02/17/00 to my SEC complaint HO#250836 in connection with my Order to Sell 100,000 shares of CLSI at 10:10 AM EST on 02/09/00. This complaint was first [introduced] to your customer service representative, Andrea, at 10:50 AM EST, as Trade Inquiry, Case #000209-2549. She understood that I was complaining that Order #807 took 30 minutes to execute while the Bid price dropped from $0.32 to $0.24. As you pointed out, I did receive a one cent per share credit amounting to $1000, on 02/16/00, as a result of inquiry #43178. No other explanation was given by the unknown author of your Account Alert message. That adjustment is yet another [reason] for continuing this complaint as it makes me feel as though someone is saying: "He will not object to us stealing $8000 if we give him $1000 back"!
Your response does not address the issues or the seriousness of my complaint. I will once again document my grievance for your records as well as the SEC's. I have not registered my complaint with any Market Maker because they are your agent in this transaction and I, as your customer, must rely on your relationship with them to ensure that I receive a fair and legal trade execution, which I did not receive.
I was happy to read one of your statements: This order was immediately routed by E*TRADE to the Market Maker (MM) for execution. Up to now, I have never been assured of that fact. Before continuing I want to advise you that I disagree with several other statements made within your response and/or its attachments. Allow me to paraphrase these disagreements rather than rebut each of your insinuations.
I am a knowledgeable investor who has made enormous profits this year, all involving OTC Bulletin Board (OTCBB) securities. I have completed 127 trades this year and watched thousands more during periods of volatility with 99.9% of them executed at the posted Bid or Ask. Pink Sheet securities have unreliable Bid/Ask postings, not OTCBB stocks! Your TV commercials accurately reflect the anxiety of the exact moment your customer decides to place their order because there is no turning back. That IS the issue; a Market Maker is REQUIRED to answer the phone at that moment and make the trade at the posted Bid or Ask price. Any delay in that scenario, other than an Order Imbalance, has criminal implications and therefore each trade execution must have an audit trail showing trade specifics. How else can our SEC Enforcement Authorities ensure to us, the world's investors, that theft of an investor's funds is a remote possibility? Reality AND your commercials assume an honest execution at that moment or as soon thereafter as humanly possible with the assistance of computers working at the speed of light. I also know the difference between your customers' Market Orders and their Limit Orders, as well as the Market Makers' obligations TO YOU for each order type. I also understand the latitude Market Makers have during an order imbalance, which IS NOT defined as a period of common volatility! I also see (using Level 2 Applications) unfair changes Market Makers make to the posted Bid/Ask prices before or after a microscopic number of shares are traded (as that number relates to minute, hourly, or daily volume).
Therefore my complaint is: THEFT OF FUNDS AMOUNTING TO GRAND LARCENY because: At 10:10 AM EST on 02/09/00 (E*TRADE says this time was 10:11 AM) my Market Order #807 to sell 100,000 shares of CLSI was placed. At that time there were four (4) Market Makers (MM) with a Best Bid of $0.32, each size was 50.
Maximum Proceeds Possible: $32,000.00.
At 10:40:15 AM EST on 02/09/00, ELAPSED TIME = 30 minutes, Market Order #807 to sell 100,000 shares of CLSI was executed at $0.24.
Proceeds Received: $24,000 plus $1,000.00 on 02/16/00.
Maximum Loss of Funds: $7,000.
During this 30-minute delay several oddities occurred, namely:
My trade took 30 minutes to execute while the Bid dropped 25% to the day's low.
$0.24 first occurred at 10:39:54
$0.24 last occurred at 10:51:48
The following Chart highlights all trades greater than 49,000 shares during the hour in question. It proves illegal postponing to gather, sort and place all large orders so that their execution would occur within minutes of each other and at the hour and day's low price. It also shows these trades being made in far greater amounts than the posted 5,000 share size for each MM. This action in and of itself proves the absence of Partial Fills which most certainly would have been executed at a different and higher price (initially) if all MMs were trying to maintain the market during a run on the stock, which was NOT the case!
TIME/ ELAPSED TIME/ PRICE SOLD TO MM/ (Possible) MM BUYS
No large blocks traded in the 14 minutes since Order #807 was placed
10:25:45 15 mins. 0.29 50,000
No large blocks traded in next 8 minutes
10:33:36 23 mins. 0.25 50,000
10:34:57 25 mins. 0.25 100,000
10:37:00 27 mins. 0.26 50,000
10:37:21 27 mins. 0.26 50,000
10:37:45 27 mins. 0.25 67,600
10:38:09 28 mins. 0.25 50,000
10:40:15 30 mins. 0.24 100,000
10:43:45 33 mins 0.36 175,000
NOTE: The trades surrounding the one above were all executed at Bid $0.24 or Bid/Ask $0.25
10:44:36 34 mins. 0.24 80,000
10:45:24 35 mins. 0.24 57,000
10:45:39 35 mins. 0.25 100,000
No large blocks traded in next 6 minutes
10:51:51 41 mins. 0.25 140,000
10:52:21 42 mins. 0.25 50,000
10:54:21 44 mins. 0.252 50,000
10:54:33 44 mins. 0.252 100,000
10:54:45 44 mins. 0.25 75,000
10:56:42 47 mins. 0.252 5,000
(Ref. for next trade)
10:56:54 46 mins. 0.395 2,000
NOTE: I believe this trade (an outrageous DAY, MONTH, and YEAR high) was a MM signal to each other indicating the artificially contrived walk down was over!
10:57:00 47 mins. 0.25 200,000
No large blocks traded in next 13 minutes
11:10:00 60 mins. BID = 0.30 ASK =0.31
Bid was back and stable at $0.30 (At the Close the Bid was still stable at $0.28)
Parenthetical Note: I placed another Order during this same time frame on an OTCBB stock experiencing greater volatility without any of the problems outlined above!
At 10:25 AM EST I placed a Market Order to Sell 39,000 shares of HCCAE; Posted Bid was $0.24.
At 10:32 AM EST this trade was executed at $0.24; ELAPSED TIME = 7 minutes.
HCCAE traded 51,222,800 shares on 02/09/00, 33,357,600 MORE than the 17,865,200 CLSI shares traded that day that's 2.8 times CLSI's volatility!
In summary, the above facts along with the reality that this price maneuver occurred within one hour, actually created excess MM profits and added many additional low cost shares to their inventory. These CLSI securities were in high demand by investors throughout the day and days following this incident which allowed the involved MMs to sell their low cost excess shares at a later and much higher Market price.
I feel completely unsupported by E*TRADE because my experience is that you play the role of Pontius Pilate much, much too frequently; appearing to be truly helpless in the Market Makers' art of taking a little more (and more) undeserved monies from the investing community. I am not going to fight windmills but I will continue to ask the SEC to level the playing field by pursuing illegal trading actions.
04/20/00 Note: I have yet to receive a response from the SEC. Yesterday, I received another response from E*Trade's Compliance Officer...again the 3-page letter did not address any of my complaints but it was filled with directions to: "How to Buy Bulletin Board Stocks"; "Important Facts For Online Investors"; "Examples of Limit Orders"; and the like!
W.H.D.
cc: Ms. Cecelia Howell, U. S. Securities and Exchange Commission
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