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Non-Tech : Datek Brokerage $9.95 a trade -- Ignore unavailable to you. Want to Upgrade?

To: Harpo who wrote (9790)	9/24/1998 9:57:00 PM
From: Rommy B.	Read Replies (1) \| Respond to of 16892

As most of you know, Datek makes the bulk of its profits not from the $10 commission they charge us, but rather from compensation they receive directly from market makers (MMs). Datek and other online stock brokers, such as E-Trade, refer our orders to MMs who execute them. These MMs give Datek a percentage of their profits for referring their clients (us) to them. Why? First, the MMs benefit from the bid-ask spread, so every time an order is executed the MMs can profit. Sometimes, though, MMs manipulate their powers and investors trading through Datek may find themselves getting a bad fill or worse yet finding that they have to liquidate a short position even though all other brokerage houses have plenty of shares available for shorting. In other words, Datek is at a position to make a profit at the little guy's expense. All of us have our own tales of online brokerage manipulations, that is when we are even aware that they have happened. My latest such incident happened today as I was trying to cover a short position through E-Trade. When my limit order was not filled (even though the current ask was below my limit order) I placed a market order to fill the order. I had to wait for 30 minutes for that market order to get executed! Half an hour! And amazingly (you guessed it) I got stuck with the worst fill possible. My small $20 commission nailed me with a $400 loss... E-trade is now in the process of "investigating" what happened, but I took this matter a step further. I have contacted a local newspaper reporter (the San Jose Mercury news, CA) and he sounded initially interested in running a story about the way online brokerage houses can (and do) manipulate the small investor. Something smells bad with Datek's recent actions. Their brazen decision to ask their customers to relinquish their short positions suggests that Datek was not acting in its customers' best interest. I am now collecting other stories from people with similar experiences. The public in large is not aware how often the small commission we pay translates into large losses (or big gains for the brokage houses and the MMs). I hope that these stories, as told by a reporter, will help reveal some of the unethical or possibly even illegal actions taken by the supposed "small-investor friendly" online investment houses. You can contact me via PM or at right_solution@juno.com. -Rommy