WellsTrade unauthorized reduction of good till canceled buy order

[HpRyder]

Had a disconcerting WellsTrade situation occur. On 8/23 entered a buy good till canceled order for Dominion Res (D) at $50/share.

On 9/7 I got a Wells Fargo Advisors confirmation dated 8/31, showing an open order buy for D at 49.30 with a date entered of 8/31 and type ex-dividend.

The first two times I detected this with different stock open orders, I just put it down to my record keeping. But not this time.

After spending 45 min on line with a WellsTrade broker, and his conferring with management, it turns out their new brokerage system automatically reduces buy order prices by the stock dividend at the ex-dividend date.

I pressed him on how to opt out of this and he said there was a check box on the order form, but neither he nor I could find it.

I asked him how then to avoid this situation and he said check the ex-dividend date of all open order stocks and manually change the prices back AFTER they change. He had no solution to what happens if the stock trades down to the original buy price, but not the reduced price, just after the price is reduced and before the price is restored. And the order is not executed.

He said another possible solution was that WellsTrade would just issue a modification to their trading brokerage agreement.
He wrote up a complaint and said it would be looked at sometime within the next 72 hours.

To date they have not gotten back to me on a solution to this. The old system didn't change any order prices. This new system does and to date you cannot stop it.

Until WellsTrade corrects their new, in-development service, BEWARE of changed order prices.

[Sunset]

I had read that options do this automatically, meaning change the price upon a dividend date, since I only do a few options though I confess to not bothering to pay attention to it.
It is supposed to make everything more "fair".

This sounds like it does the same, imagine for your order if the dividend was $20 , and your order didn't change, you would of course find a buyer pretty quickly and vastly overpay for the stock.

[jim584672]

It is normal for GTC orders to be reduced ex-dividend date. The order needs to be marked "DNR" ("do not reduce") for it to remain as is. This is an exchange rule, not a broker rule. I am surprised they don't know this.

[Texas Proud]

I am surprised they did not know it either....

Most people do NOT want to pay the price if a stock went ex dividend... some divis are big compared to their price...


The system will not be changed.... you have to do what options they have given if you do not want this to happen... if they do not have an option, then complain...

[RE2Boys]

Your story doesn't speak very highly regarding the training and service of the brokerage you use if they could not explain this. It is common practice as the day the stock goes ex-dividend, you are purchasing an interest in a company that is worth less than the day you put in your order, you lost the right to a dividend and the company has committed possibly millions of dollars to be disbursed to shareholders of record, and your not one of them. Makes perfect sense.

[Mulligan]

Quote:

Originally Posted by jim584672 It is normal for GTC orders to be reduced ex-dividend date. The order needs to be marked "DNR" ("do not reduce") for it to remain as is. This is an exchange rule, not a broker rule. I am surprised they don't know this.

Always thought that was SOP anyways, I never knew any different. Besides, I dont know why OP would be so bothered. D hasnt traded at $50 since 2012 so nothing was affected and a lesson was learned. Seems like an excellent time to learn when no damage occurred.

[Sunset]

Wow, I didn't look up 'D' until after Mulligan's post.

OP - Were you trying to prove something?
Did you really expect to get 'D' for $50 considering it's at $75 right now.

I think a more fun experiment would be to put in a bid of $0.60 right before the dividend time, and see what happens when they reduce your bid by the $0.70 dividend

[HpRyder]

jim584672, it'd be great if WellsTrade actually had a "DNR" check box, but neither the broker nor I could find it.

And yes I think D will drop similarly to what CVX did on Aug 24 & 15 when it traded below 68 after trading 105 in May. A D dream price occurred for 4 days in June 2013. Since setting GTC prices is free I'm doing it for a few select stocks that I believe could possibly reach those levels during a brief "flash crash" due to a short sudden oil price drop. They probably will not do it but just in case they do, I've got my orders in.

[Mulligan]

Quote:

Originally Posted by HpRyder jim584672, it'd be great if WellsTrade actually had a "DNR" check box, but neither the broker nor I could find it. And yes I think D will drop similarly to what CVX did on Aug 24 & 15 when it traded below 68 after trading 105 in May. A D dream price occurred for 4 days in June 2013. Since setting GTC prices is free I'm doing it for a few select stocks that I believe could possibly reach those levels during a brief "flash crash" due to a short sudden oil price drop. They probably will not do it but just in case they do, I've got my orders in.

And I didnt mean to imply what you are doing is wrong...Sounds great to me! I just meant I have always learned my "lesson" AFTER the leather belt was smacked across my rear. You got off scott free with no welt on your rear!

[Sunset]

Quote:

Originally Posted by HpRyder .... And yes I think D will drop similarly to what CVX did on Aug 24 & 15 when it traded below 68 after trading 105 in May. A D dream price occurred for 4 days in June 2013. Since setting GTC prices is free I'm doing it for a few select stocks that I believe could possibly reach those levels during a brief "flash crash" due to a short sudden oil price drop. They probably will not do it but just in case they do, I've got my orders in.

I get it, and have tried this in the past but it never worked for me

[jim584672]

Quote:

Originally Posted by HpRyder jim584672, it'd be great if WellsTrade actually had a "DNR" check box, but neither the broker nor I could find it. And yes I think D will drop similarly to what CVX did on Aug 24 & 15 when it traded below 68 after trading 105 in May. A D dream price occurred for 4 days in June 2013. Since setting GTC prices is free I'm doing it for a few select stocks that I believe could possibly reach those levels during a brief "flash crash" due to a short sudden oil price drop. They probably will not do it but just in case they do, I've got my orders in.

I just checked my broker again. Once GTC is selected the DNR option is available in one of the drop downs. I don't want to say the broker due to privacy concerns.