Clients must be familiar with the following responsibilities and must agree to follow all Regulatory and Exchange rules:
It is always the client's responsibility to review their account daily, through Apex Clearing (the clearing firm) at their website https://online.apexclearing.com and compare the information shown there versus the information displayed on the trading software. If there is any discrepancy of any kind, including but not limited to; current equity, buying power, or positions the client must contact OptionsRoute/ViewTrade Securities (VTS) prior to acting on any information that does not match. Also if you ever believe for any reason that anything is incorrect in your account, please make sure you always contact us before acting. If a client acts before contacting us to verify the validity of their account information or fails to review their account on a daily basis, any issues that arise as a result of not reviewing their information or contacting our firm in a timely manner will be solely the client's responsibility.
Clients are solely responsible for any order placed in their account or by their user. Clients must be sure to keep their user names and passwords secure and not allow any other party to have access to that information. Any trades placed in the client's user or account are considered valid. The client account will be responsible for any execution or cancellation on those orders, regardless of the timing of that order. Limit orders placed and left outstanding in client accounts may be executed at any time, including in pre-market or after-hours trading. Clients are responsible for cancelling any order they do not want to be executed.
It is also the client's responsibility to review all their open orders daily, especially if you are placing GTC (good till cancelled) orders. If you believe you had an order that for some reason is not showing on your software or have any other issue or problem with any order, you will need to contact us immediately. You will be responsible for this daily review of your open orders. Any issues caused by the failure to do this review and to contact us in a timely manner to resolve any discrepancies will be solely the clients responsibility. Also, please note that you alone are responsible for any orders you place in your account and the resulting executions from those orders.
STOCK SPLITS, SYMBOL CHANGES & OPTIONS
It is the client's responsibility to notify OptionsRoute/ViewTrade Securities (VTS) if they hold any stock that has either a forward or reverse stock split and/or if any stock they own has a symbol change of any kind. The client will also need to contact us if you are holding an option that has expired, been exercised, assigned or changes symbols. The trading software will NOT automatically adjust for these changes. The client will need to contact us and we will manually adjust their trading software to reflect these changes.
The term 'short sale' means any sale of a security, which the seller does not own, or any sale, which is consummated by the delivery of a security, borrowed by, or for the account of the seller. For stocks hard to borrow, short sales must be preceded by a request to OptionsRoute/ViewTrade Securities (VTS) to make sure stocks can be borrowed. We will then contact the Clearing Services's Stock Loan Department to ensure the availability of the stock. If approval is granted by the Stock Loan Department, and OptionsRoute/ViewTrade Securities (VTS) will inform you that the stock can be sold short. If approval is not received, the security in question cannot be shorted. If you short a stock that has not been located, the transaction may be cancelled and you will be responsible for any losses incurred. Short sales made on stocks not located will result in a buy-in. All trades that violate these rules will be put into OptionsRoute/ViewTrade Securities (VTS) these rules can result in your account being closed. Assuming the security in question can be shorted, the short sale must take place as 'sell short'. If the trader uses a sell to place a short sale or over-sells a position, it is possible that the trade will be executed illegally. This is a violation of FINRA and SEC rules. The trader is responsible to cover any illegal position immediately with a corresponding buy. You will be responsible for any losses from invalid short sales and any invalid gains from these trades are illegal and will be removed. These issues must be reported via e-mail to OptionsRoute/ViewTrade Securities (VTS) by the end of the trading day.
There are 2 types of margin available - Overnight (2:1) and Day Trading (4:1). Overnight buying power is limited to two times the available equity at the end of the preceding day. Overnight positions held above two times equity will result in a federal margin call. You may have up to 3 business days to cover an overnight call by either sending in new funds for the amount of the call or liquidating positions to meet the call. If you liquidate positions to meet this call, your account may be restricted or closed. If you do not cover the amount of the call when due, OptionsRoute/ViewTrade Securities (VTS) will liquidate your position.
Day Trading buying power is applied to stocks that you day trade (buy and sell in the same day). For margin accounts with equity above $25,000, the margin is set at 4:1 and there is no limit on the number of day trades that can be made. Note that overnight positions still must not exceed 2:1 margin. For accounts under $25,000, there is a limit of 3 day trades allowed per any 5 consecutive business day period. Overnight positions are not affected by this limitation. If you violate this rule, your account may be restricted or closed. It is the client's responsibility to abide by these rules. The electronic order entry software systems provided to you by OptionsRoute/ViewTrade Securities (VTS) cannot do this on your behalf.
Buying power figures are set at the beginning of the day and generally will not be increased for the remainder of the day (covering overnight positions may not increase these numbers). When you have overnight positions your available buying power will generally be computed as follows: 30% of short positions and 25% of long positions, subtract both figures from your equity and double what is left over. These percentages may be subject to change or differ by stock.
There are also increased margin requirements when shorting low priced stocks. The minimum requirement is $2.50 per share on shorts, so if you short a stock trading under $2.50 a share you still will be held to the increased requirement of $2.50 per share. Stocks trading between $2.50 and $5 will be held to 100% requirement on shorts. Stocks above $5 per share will be held to a minimum requirement of $5 per share and then the regular short requirements thereafter.
You will receive a margin call if you go over your day trading buying power at any point during the day. This day trading call must be met with cash only within seven business days. If you do not meet your day trading buying power call, Apex Clearing will CLOSE YOUR ACCOUNT.
OptionsRoute/ViewTrade Securities (VTS) will generally attempt to contact you about any margin calls you may receive. This notice may be done by e-mail, phone or by other means pertaining to the details of your margin call. Clients must strictly adhere to all margin rules. Please be aware that OptionsRoute/ViewTrade Securities (VTS)is in no way obligated to inform you of your margin calls. It is your responsibility to monitor your own account at all times. OptionsRoute/ViewTrade Securities (VTS) or the Clearing Firm Services may also cover part or all of your position to meet your margin call at anytime with or without notice. The Clearing Firm Services(APEX) may choose to stop extending any credit at all or close the account for repeat violators. Also no checks or wire transfers can be sent out of the account unless there is available free cash of at least that amount in the account.
The amount of equity required to open and maintain a pattern day-trading account is $25,000. If your equity drops below this amount you must deposit additional funds to get your equity back up to $25,000. If you do not maintain the minimum equity, your account may be allowed to become a regular margin account with buying power determined by the clearing firm and limited to 3 day-trades in a five day period. Positions held overnight do not count as day-trades.
It takes 3 business days for traded funds to settle in cash accounts. When you sell a stock, the clearing firm will issue you buying power the following business day; however, those funds cannot be reused for at least 3 business days. If unsettled funds are used to buy a new position and you sell that new position before settlement of the original sell order, that is considered a good faith violation of free riding and withholding. Your account will be closed if you get these violations repeatedly. You must hold new positions past settlement of the original sell trade to avoid this good faith violation. This violation can also be avoided by opening a margin account, as margin account funds can be reused before settlement without the 3-day restriction.
Clients cannot trade in excess of 10% of the previous 20 business day average trading volume of any stock on any day regardless of the stock's price. In addition, for stocks trading below $1 per share, clients cannot trade more than 25% of the current day's trading volume. If a client trades in excess of these restrictions, then their accounts may be subject to closure and/or interest charges during the 3-day settlement period of those trades. The interest charges will be assessed on an illiquidity requirement imposed on the clearing firm, which could be many times the value of the trade. The interest rates charged to clients who violate these restrictions will be between 15% - 25% per year, assessed at a daily rate during the trade settlement period.
OVERNIGHT BUY POWER RELEASE
When you cover a position you had held overnight, we can allow the trading software to give you a release of buy power. This release will show up in both your intraday and overnight buy power numbers on the software. The reason for this is because the overnight buy power amount shown in the software is only informational. It does not actually limit you to only trading that amount because the software does not know how long you will hold a position when you open it. The release that goes into your intraday buy power CANNOT be used for intraday trading (day trading). If you do any intraday trades (day trades), they can only be done using the initial intraday buy power you had before you covered the overnight position and got an additional release. You cannot use the newly released funds for new day trades. It can ONLY be used for taking new overnight positions. If you do use the released funds for new intraday trades (day trades) then you will get a day trading (DT) margin call. That type of DT call can ONLY be met by depositing new funds. If you get a DT call and do not deposit funds to meet that call, your account would be closed.
The routing fees on the website and as set in the software are subject to change at anytime. You are responsible to know the correct fee for any route you are trading through. If necessary, we reserve the right to charge or adjust for venue, routing, or exchange fees.
System response, trade executions and account access may be affected by market conditions, system performance, quote delays and other factors. The risk of loss in electronic trading can be substantial. You should therefore consider whether such trading is suitable for you in light of your financial resources and circumstances. We can not and will not be held responsible for losses resulting from issues with the use of third party software quoting systems or third party order execution routing issues. We only provide our clients with the ability to connect to quoting software and order execution routes, we do not own or control them.
The procedures and rules listed on this page are for informational purposes and may be subject to change, which may not be reflected on this page, or may be updated without notice. This is only a partial list of trader's responsibilities. Traders need to understand that they have far more responsibilities than are or can be listed here. If you have any questions about any of your responsibilities, please contact us.
Important Information on Penny Stocks
This statement is required by the U.S. Securities and Exchange Commission (SEC) and contains important information on penny stocks. Your broker-dealer is required to obtain your signature to show that you have received this statement before your first trade in a penny stock. You are urged to read this statement before signing and before making a purchase or sale of a penny stock.
Penny stocks can be very risky
Penny stocks are low-priced shares of small companies not traded on an exchange or quoted on NASDAQ. Prices often are not available. Investors in penny stocks often are unable to sell stock back to the dealer that sold them the stock. Thus, you may lose your investment. Be cautious of newly issued penny stock. Your salesperson is not an impartial advisor but is paid to sell you the stock. Do not rely only on the salesperson, but seek outside advice before you buy any stock. If you have problems with a salesperson, contact the firm's compliance officer or the regulators listed below.
Information you should get
Before you buy penny stock, federal law requires your salesperson to tell you the "offer" and the "bid" on the stock, and the "compensation" the salesperson and the firm receive for the trade. The firm also must mail a confirmation of these prices to you after the trade. You will need this price information to determine what profit, if any, you will have when you sell your stock. The offer price is the wholesale price at which the dealer is willing to sell stock to other dealers. The bid price is the wholesale price at which the dealer is willing to buy the stock from other dealers. In its trade with you, the dealer may add a retail charge to these wholesale prices as compensation (called a "markup" or "markdown"). The difference between the bid and the offer price is the dealer's "spread." A spread that is large compared with the purchase price can make a resale of a stock very costly. To be profitable when you sell, the bid price of your stock must rise above the amount of this spread and the compensation charged by both your selling and purchasing dealers. If the dealer has no bid price, you may not be able to sell the stock after you buy it, and may lose your whole investment.
Brokers' duties and customer's rights and remedies
If you are a victim of fraud, you may have rights and remedies under state and federal law. You can get the disciplinary history of a salesperson or firm from the FINRAat 1-800-289-9999, and additional information from your state securities official, at the North American Securities Administrators Association's central number: (202) 737-0900. You also may contact the SEC with complaints at (202) 272-7440.
The securities being sold to you have not been approved or disapproved by the Securities and Exchange Commission. Moreover, the Securities and Exchange Commission has not passed upon the fairness or the merits of this transaction nor upon the accuracy or adequacy of the information contained in any prospectus or any other information provided by an issuer or a broker or dealer.
Generally, penny stock is a security that:
- Is priced under five dollars;
- Is not traded on a national stock exchange or on NASDAQ (the NASD's automated quotation system for actively traded stocks);
- May be listed in the "pink sheets" or the FINRA OTC Bulletin Board;
- Is issued by a company that has less than $5 million in net tangible assets and has been in business less than three years, by a company that has under $2 million in net tangible assets and has been in business for at least three years, or by a company that has revenues of $6 million for 3 years.
Use Caution When Investing in Penny Stocks:
1. Do not make a hurried investment decision. High-pressure sales techniques can be a warning sign of fraud. The salesperson is not an impartial advisor, but is paid for selling stock to you. The salesperson also does not have to watch your investment for you. Thus, you should think over the offer and seek outside advice. Check to see if the information given by the salesperson differs from other information you may have. Also, it is illegal for salespersons to promise that a stock will increase in value or is risk-free, or to guarantee against loss. If you think there is a problem, ask to speak with a compliance official at the firm, and, if necessary, any of the regulators referred to in this statement.
2. Study the company issuing the stock. Be wary of companies that have no operating history, few assets, or no defined business purpose. These may be sham or "shell" corporations. Read the prospectus for the company carefully before you invest. Some dealers fraudulently solicit investors' money to buy stock in sham companies, artificially inflate the stock prices, then cash in their profits before public investors can sell their stock.
3. Understand the risky nature of these stocks. You should be aware that you may lose part or all of your investment. Because of large dealer spreads, you will not be able to sell the stock immediately back to the dealer at the same price it sold the stock to you. In some cases, the stock may fall quickly in value. New companies, whose stock is sold in an "initial public offering," often are riskier investments. Try to find out if the shares the salesperson wants to sell you are part of such an offering. Your salesperson must give you a "prospectus" in an initial public offering, but the financial condition shown in the prospectus of new companies can change very quickly.
4. Know the brokerage firm and the salespeople with whom you are dealing. Because of the nature of the market for penny stock, you may have to rely solely on the original brokerage firm that sold you the stock for prices and to buy the stock back from you. Ask the National Association of Securities Dealers, Inc. (NASD) or your state securities regulator, which is a member of the North American Securities Administrators Association, Inc. (NASAA), about the licensing and disciplinary record of the brokerage firm and the salesperson contacting you. The telephone numbers of the FINRAand NASAA are listed on the first page of this document.
5. Be cautious if your salesperson leaves the firm. If the salesperson who sold you the stock leaves his or her firm, the firm may reassign your account to a new salesperson. If you have problems, ask to speak to the firm's branch office manager or a compliance officer. Although the departing salesperson may ask you to transfer your stock to his or her new firm, you do not have to do so. Get information on the new firm. Be wary of requests to sell your securities when the salesperson transfers to a new firm. Also, you have the right to get your stock certificate from your selling firm. You do not have to leave the certificate with that firm or any other firm.
Disclosures to you. Under penalty of federal law, your brokerage firm must tell you the following information at two different times-before you agree to buy or sell a penny stock, and after the trade, by written confirmation:
* The bid and offer price quotes for penny stock, and the number of shares to which the quoted prices apply. The bid and offer quotes are the wholesale prices at which dealers trade among themselves. These prices give you an idea of the market value of the stock. The dealer must tell you these price quotes if they appear on an automated quotation system approved by the SEC. If not, the dealer must use its own quotes or trade prices. You should calculate the spread, the difference between the bid and offer quotes, to help decide if buying the stock is a good investment.
A lack of quotes may mean that the market among dealers is not active. It thus may be difficult to resell the stock. You also should be aware that the actual price charged to you for the stock may differ from the price quoted to you for 100 shares. You should therefore determine, before you agree to a purchase, what the actual sales price (before the markup) will be for the exact number of shares you want to buy.
* The brokerage firm's compensation for the trade. A markup is the amount a dealer adds to the wholesale offer price of the stock and a markdown is the amount it subtracts from the wholesale bid price of the stock as compensation. A markup/markdown usually serves the same role as a broker's commission on a trade. Most of the firms in the penny stock market will be dealers, not brokers.
* The compensation received by the brokerage firm's salesperson for the trade. The brokerage firm must disclose to you, as a total sum, the cash compensation of your salesperson for the trade that is known at the time of the trade. The firm must describe in the written confirmation the nature of any other compensation of your salesperson that is unknown at the time of the trade.
In addition to the items listed above, your brokerage firm must send to you:
* Monthly account statements. In general, your brokerage firm must send you a monthly statement that gives an estimate of the value of each penny stock in your account, if there is enough information to make an estimate. If the firm has not bought or sold any penny stocks for your account for six months, it can provide these statements every three months.
* A Written Statement of Your Financial Situation and Investment Goals. In general, unless you have had an account with your brokerage firm for more than one year, or you have previously bought three different penny stocks from that firm, your brokerage firm must send you a written statement for you to sign that accurately describes your financial situation, your investment experience, and your investment goals, and that contains a statement of why your firm decided that penny stocks are a suitable investment for you. The firm also must get your written consent to buy the penny stock.
Legal remedies. If penny stocks are sold to you in violation of your rights listed above, or other federal or state securities laws, you may be able to cancel your purchase and get your money back. If the stocks are sold in a fraudulent manner, you may be able to sue the persons and firms that caused the fraud for damages. If you have signed an arbitration agreement, however, you may have to pursue your claim through arbitration. You may wish to contact an attorney. The SEC is not authorized to represent individuals in private litigation.
However, to protect yourself and other investors, you should report any violations of your brokerage firm's duties listed above and other securities laws to the SEC, the FINRA or your state securities administrator at the telephone numbers on the first page of this document. These bodies have the power to stop fraudulent and abusive activity of salespersons and firms engaged in the securities business. Or you can write to the SEC at 450 Fifth St., NW., Washington, DC 20549; the FINRAat 1735 K Street, NW., Washington, DC 20006; or NASAA at 555 New Jersey Avenue, NW., Suite 750, Washington, DC 20001. NASAA will give you the telephone number of your state's securities agency. If there is any disciplinary record of a person or a firm, the FINRA NASAA, or your state securities regulator will send you this information if you ask for it.
The market for penny stocks. Penny stocks usually are not listed on an exchange or quoted on the NASDAQ system. Instead, they are traded between dealers on the telephone in the "over-the-counter" market. The NASD's OTC Bulletin Board also will contain information on some penny stocks. At times, however, price information for these stocks is not publicly available.
Market domination. In some cases, only one or two dealers, acting as "market makers," may be buying and selling a given stock. You should first ask if a firm is acting as a broker (your agent) or as a dealer. A dealer buys stock itself to fill your order or already owns the stock. A market maker is a dealer who holds itself out as ready to buy and sell stock on a regular basis. If the firm is a market maker, ask how many other market makers are dealing in the stock to see if the firm (or group of firms) dominates the market. When there are only one or two market makers, there is a risk that the dealer or group of dealers may control the market in that stock and set prices that are not based on competitive forces. In recent years, some market makers have created fraudulent markets in certain penny stocks, so that stock prices rose suddenly, but collapsed just as quickly, at a loss to investors.
Mark-ups and mark-downs. The actual price that the customer pays usually includes the mark-up or mark-down. Markups and markdowns are direct profits for the firm and its salespeople, so you should be aware of such amounts to assess the overall value of the trade.
The "spread." The difference between the bid and offer price is the spread. Like a mark-up or mark-down, the spread is another source of profit for the brokerage firm and compensates the firm for the risk of owning the stock. A large spread can make a trade very expensive to an investor. For some penny stocks, the spread between the bid and offer may be a large part of the purchase price of the stock. Where the bid price is much lower than the offer price, the market value of the stock must rise substantially before the stock can be sold at a profit. Moreover, an investor may experience substantial losses if the stock must be sold immediately.
Example: If the bid is $0.04 per share and the offer is $0.10 per share, the spread (difference) is $0.06, which appears to be a small amount. But you would lose $0.06 on every share that you bought for $0.10 if you had to sell that stock immediately to the same firm. If you had invested $5,000 at the $0.10 offer price, the market maker's repurchase price, at $0.04 bid, would be only $2,000; thus you would lose $3,000, or more than half of your investment, if you decided to sell the stock. In addition, you would have to pay compensation (a "mark-up," "mark-down," or commission) to buy and sell the stock. \1/4\ In addition to the amount of the spread, the price of your stock must rise enough to make up for the compensation that the dealer charged you when it first sold you the stock. Then, when you want to resell the stock, a dealer again will charge compensation, in the form of a markdown. The dealer subtracts the markdown from the price of the stock when it buys the stock from you. Thus, to make a profit, the bid price of your stock must rise above the amount of the original spread, the markup, and the markdown.
Primary offerings. Most penny stocks are sold to the public on an ongoing basis. However, dealers sometimes sell these stocks in initial public offerings. You should pay special attention to stocks of companies that have never been offered to the public before, because the market for these stocks is untested. Because the offering is on a first-time basis, there is generally no market information about the stock to help determine its value. The federal securities laws generally require broker-dealers to give investors a "prospectus," which contains information about the objectives, management, and financial condition of the issuer. In the absence of market information, investors should read the company's prospectus with special care to find out if the stocks are a good investment. However, the prospectus is only a description of the current condition of the company. The outlook of the start-up companies described in a prospectus often is very uncertain.
For more information about penny stocks, contact the Office of Filings, Information, and Consumer Services of the U.S. Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549, (202) 272-7440.
MARGIN RISK DISCLOSURE
Your brokerage firm is furnishing this document to you to provide some basic facts about purchasing securities on margin, and to alert you to the risks involved with trading securities in a margin account. Before trading stocks in a margin account, you should carefully review the margin agreement provided by your firm. Consult your firm regarding any questions or concerns you may have with your margin accounts.
When you purchase securities, you may pay for the securities in full or you may borrow part of the purchase price from your brokerage firm. If you choose to borrow funds from your firm, you will open a margin account with the firm. The securities purchased are the firm’s collateral for the loan to you. If the securities in your account decline in value, so does the value, so does the value of the collateral supporting your loan, and as a result, the firm can take action, such as issue a margin call and/or sell securities or other assets in any of your accounts held with the member, in order to maintain the required equity in the account.
It is important that you fully understand the risks involved in trading securities on margin. These risks include the following:
You can lose more funds than you deposit in the margin account. A decline in the value of securities that are purchased on margin may require you to provide additional funds to the firm that has made the loan to avoid the forced sale of those securities or other securities or assets in your account(s).
The firm can force the sale of securities or other assets in your account(s). If the equity in your account falls below the maintenance margin requirements or the firm’s higher "house" requirements, the firm can sell the securities or other assets in any of your accounts held at the firm to cover the margin deficiency. You also will be responsible for any short fall in the account after such a trade.
The firm can sell your securities or other assets without contacting you. Some investors mistakenly believe that a firm must contact them for a margin call to be valid, and that the firm cannot liquidate securities or other assets in their accounts to meet the call unless the firm has contacted them first. This is not the case. Most firms will attempt to notify their customers of margin calls, but they are not required to do so. However, even if a firm has contacted a customer and provided a specific date by which the customer can meet a margin call, the firm can still take necessary steps to protect its financial interests, including immediately selling the securities without notice to the customer.
You are not entitled to choose which securities or other assets in your account(s) are liquidated or sold to meet a margin call. Because the securities are collateral for the margin loan, the firm has the right to decide which security to sell in order to protect its interests.
The firm can increase its "house" maintenance margin requirements at any time and is not required to provide you advance written notice. These changes in firm policy often take effect immediately and may result in the issuance of a maintenance margin call. Your failure to satisfy the call may cause the member to liquidate or sell securities in your account(s).
You are not entitled to an extension of time for a margin call. While an extension of time to meet margin requirements may be available to customers under certain conditions, a customer does not have a right to the extension.
The IRS requires Broker Dealers to treat dividend payments on loaned securities positions as a "substitute payment" in lieu of a dividend. A substitute payment is not, a "Qualified dividend" and is taxed as ordinary income.
Industry regulations may limit in whole or in part, your ability to exercise voting rights of securities that have been lent or pledged to others. You may receive proxy materials indicating voting rights for a fewer number of shares than are in your account, or you may not receive any proxy materials.
Rule 2361. Day Trading Risk Disclosure Statement
You should consider the following points before engaging in a day-trading strategy. For purpose of this notice, a “day-trading strategy” means an overall trading strategy characterized by the regular transmission by a customer of intra-day orders to effect both purchase and sale transactions in the same security or securities.
Day trading can be extremely risky. Day trading generally is not appropriate for someone of limited resources and limited investment or trading experience and low risk tolerance. You should be prepared to lose all of the funds that you use for day trading. In particular, you should not fund day-trading activities with retirement savings, student loans, second mortgages, emergency funds, funds set aside for purposes such as education or home ownership, or funds required to meet your living expenses. Further, certain evidence indicates that an investment of less than $50,000 will significantly impair the ability of a day trader to make a profit. Of course, an investment of $50,000 or more will in no way guarantee success.
Be cautious of claims of large profits from day trading. You should be wary of advertisements or other statements that emphasize the potential for large profits in day trading. Day trading can also lead to large and immediate financial losses.
Day trading requires in-depth knowledge of the securities markets and trading techniques and strategies. In attempting to profit through day trading, you must compete with professional licensed traders employed by securities firms. You should have appropriate experience before engaging in day trading.
Day trading requires knowledge of a firm’s operations. You should be familiar with a securities firm’s business practices, including the operation of the firm’s order execution systems and procedures. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a stock suddenly drops, or if trading is halted due to recent news events or unusual trading activity. The more volatile a stock is, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to systems failures.
Day trading will generate substantial commissions, even if the per trade cost is low. Day trading involves aggressive trading, and generally you will pay commissions on each trade. The total daily commissions that you pay on your trades will add to your losses or significantly reduce your earnings. For instance, assuming that a trade costs $16 and an average of 29 transactions are conducted per day, an investor would need to generate an annual profit of $111,360 just to cover commission expenses.
Day trading on margin or short selling may result in losses beyond your initial investment. When you day trade with funds borrowed from a firm or someone else, you can lose more than the funds you originally placed at risk. A decline in the value of the securities that are purchased may require you to provide additional funds to the firm to avoid the forced sale of those securities or other securities in your account. Short selling as part of your day-trading strategy also may lead to extraordinary losses, because you may have to purchase a stock at a very high price in order to cover a short position.
Potential Registration Requirements. Persons providing investment advice for others or managing securities accounts for others may need to register as either an “ Investment Advisor” under the Investment Advisors Act of 1940 or as a “Broker” or “Dealer” under the Securities Exchange Act of 1934. Such activities may also trigger state registration
EXTENDED HOURS RISK DISCLOSURE
- Risk of Lower Liquidity. Liquidity refers to the ability of market participants to buy and sell securities. Generally, the more orders that are available in a market, the greater the liquidity. Liquidity is important because with greater liquidity it is easier for investors to buy or sell securities, and as a result, investors are more likely to pay or receive a competitive price for securities purchased or sold. There may be lower liquidity in extended hours trading as compared to regular market hours. As a result, your order may only be partially executed, or not at all.
- Risk of Higher Volatility. Volatility refers to the changes in price that securities undergo when trading. Generally, the higher the volatility of a security, the greater its price swings. There may be greater volatility in extended hours trading than in regular market hours. As a result, your order may only be partially executed, or not at all, or you may receive an inferior price in extended hours trading than you would during regular market hours.
Risk of Changing Prices. The prices of securities traded in extended hours trading may not reflect the prices either at the end of regular market hours, or upon the opening the next morning. As a result, you may receive an inferior price in extended hours trading than you would during regular market hours.
- Risk of Unlinked Markets. Depending on the extended hours trading system or the time of day, the prices displayed on a particular extended hours trading system may not reflect the prices in other concurrently operating extended hours trading systems dealing in the same securities. Accordingly, you may receive an inferior price in one extended hours trading system than you would in another extended hours trading system.
- Risk of News Announcements. Normally, issuers make news announcements that may affect the price of their securities after regular market hours. Similarly, important financial information is frequently announced outside of regular market hours. In extended hours trading, these announcements may occur during trading, and if combined with lower liquidity and higher volatility, may cause an exaggerated and unsustainable effect on the price of a security.
- Risk of Wider Spreads. The spread refers to the difference in price between what you can buy a security for and what you can sell it for. Lower liquidity and higher volatility in extended hours trading may result in wider than normal spreads for a particular security