Canadian Broker Problems - Any Alternatives?

Manage
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Hi All:

Has anyone else noticed order routing problems with TDWaterhouse broker (Canada). Today I had to phone TDWaterhouse support a half dozen times because of order routing problems. I’d like to know if today was an anomoly or if this problem is systematic. I’ve recently been moving my registered accounts (retirement, etc.) to TDW from other Canadian brokerages so this problem may have existed in the past, but I only noticed it today.

Here’s what happened.

I placed a buy order at a limit price splitting the bid-ask spread. For example, if the bid was 3.10 and the ask 3.20, I place a limit order to buy at 3.15. After I clicked on “Submit”, I notice my limit priced did NOT appear on the TDW price display even though my limit price was better than the displayed bid price of 3.10. So I opened my Interactive Broker’s account and saw it also did NOT show up on IB’s level 1 prices. BUT GET THIS, my limit order did show on IB’s level 2 quotes for the LAVA exchange. My order for 2,000 shares at 3.15 was listed by IB’s level 2 as being on the LAVA exchange. Just to be clear, at the same time the level 2 was showing it at 3.15, IB’s level 1 display has the best bid at 3.10 and the best ask at 3.20. And TDWatherhouse’s level 1 prices matched the IB level 1 prices.

About 10 seconds later some other people placed limit small orders that matched my limit price of 3.15 and these other orders were displayed on BATS and BYX exchanges (according to IB’s level 2 display). Now the level 1 displays on IB and TDW displayed the limit price of 3.15 but NOT MY ORDER. I could tell my order was not displayed because my order was for 2,000 shares and the level 1 displayed only 200 shares bidding at 3.15. It gets worse. Those bids for 200 shares at 3.15 appeared to get filled. I phoned TDWaterhouse and they did a manual trade for my 2,000 shares at the currect ask (a penny higher than my missed trades) and then TDW “made me whole” by crediting my account for the extra penny a share.

I thanked the TDW rep for being made whole, but asked to have the matter escalated to a manager because I wanted reassurance this problem would not happen again. When I place a mid-point limit order to “test” the market, I need to have that price displayed on level 1 quotes. I told the manager how can I “test” the market if much of the market can’t see my order even when it is the best price! The answer I got was not satisfying. I was told TDW(Canada) uses a US partner who has sole discrestion as to what exchange to use for US stocks. I told the TDW manager to phone their US partner and tell them to phone LAVA so LAVA can fix their computer problem. I left it at at.

I returned to trading other stocks and the same problem happened two more times. More calls to TDWaterhouse. This time they did not “make me whole” because no trades had gone through at my limit price. Not a surprise to me because most of the market did not know I was offering to split the bid-ask spread. Twice again I had the issue escalated to management and I again expressed my frustration of not being able to “test” the market with limit orders that split the spread.

This time I got a new piece of info. One manager said their US partner sometimes will use “dark pool” for orders when the order size is significantly larger than the closest bid and ask sizes. This was plausible for one of my limit orders but not for all of them. I explained, a dark pool is no good to me if the order is completely hidden. I told the TDW manager I have used “dark pools” on Interactivebrokers, but I make sure to reveal 200 or 300 shares of my 2,000 order to the market so others know I’m willing to split the bid-ask.

I’d appreciate knowing if anyone has had similar routing/display problems with TDW(Canada). If it is a one-day computer problem on LAVA, I’ll just forget it. But if this is a frequently reoccuring problem I’ll be pushing TDW to fix it or get a new US partner.

Oh, I’ve escalated this issue up one more level and am told to expect a call back from a TDW executive on Monday. I’d like to have all the info I can when I talk with the executive on Monday.

Hopefully I’ll soon be able to report that TDWaterhouse has fixed this issue. There’s lots about TDW that I like.

But this issue, if it is ongoing, I’ll be looking elsewhere. Any suggestions about alternatives in Canada that accept registered accounts?

Thanks,
Brian

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Brian,

I can’t help with your broker question. But…I’m curious if you’ve seen any significant difference in fills trading ‘dark’ orders. Do you have data on this?

Best,
Tom

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Hi Tom:

I’m new to using the partially hidden dark pool approach but so far I like it, especially for stocks with wider bid-ask spreads. I first learned of this from aurelaurel (from France) in the following thread:
https://www.portfolio123.com/mvnforum/viewthread_thread,6864

And here’s the link to an Interactivebrokers article explaining their implemention. IB has this as an option in their “REL” order type.
http://ibkb.interactivebrokers.com/article/1006

I’ve found the REL order to be most clearly effective when trading lower liquidity stocks that have wide bid-ask spread. I’ve set up IB to use REL as my default order type. Thus when I click on the ASK and IB submits my order as a limit order at 1 cent better than the current bid. For example, if the stock has a bid of $5.00 and an ask of 5.10, IB will put in a limit order at 5.01 and then if someone else raised the bid to 5.02, IB will cancel my 5.01 limit order and submit a limit order at 5.03. Often my limit will sit there for several minutes and then I’ll get a partial or complete fill. Presumably someone who had a limit sell order at 5.10 got tired of waiting and lowered their limit to my bid. That’s the best case senario. At other times, the sellers hold fast at 5.10 and someone else gradually increases the bid and IB responds by raising my bid to better their bid by 1 cent. Eventually the rising bid gets to the ask and the order fills. This latter case is no worse a fill than if I had started by hitting the ask with a limit order. So sometimes the REL results in a better price and other times it results in a “normal” price.

Occassionally the sellers will see the rising bids and replace their sell limit orders with a higher price. In those cases, IB stops increasing my bid at what had been the ask when the order was first placed. Oh, having IB stop raising the bid is an option one has to set before placing the REL order. I use this so that the escalating bids don’t go on forever. Typically I set the upper limit on the bid to be equal to the current ask when I place the REL order. That way I know any fill I get will be no worse than if I had just hit the ask with a regular limit order.

The Partially Dark Pool Order Option
One great option with IB’s REL is telling IB to only show part of the order. This reduces the occassions when the sellers raise their ask – because they don’t see my full order. I’ve set IB’s defaults to only show 200 shares on my REL orders. My default IB order size is set to $20k, so when I click on the ask to initial a buy order, IB automatically calculates the number of shares to equal $20k, but IB only shows the market a limit buy order for 200 shares. For a $5.00 stock the total order would be for 4,000 shares and IB just shows 200 as a limit order. When that limit order for 200 shares gets filled, IB immediately places another 200 share limit order at the same price. If it fills, IB keeps resubmitting limit order for 200 shares. If it does not fill, that new limit order sits there as the best bid. If someone betters the bid, IB replaces the limit order with one that betters the best bid by 1 cent. And so it continues until my full order gets filled or my bid raises the upper limit I’d set (typically the ask price just before I submitted my first order). Sometimes I might only get half of my total order filled before the raising bid tops out.

Some think IB’s commissions are expensive for larger lot sizes. For that 4,000 share example above, IB’s 1/2 cent commission would add up to $20 which is twice what I’d pay for the same trade in TDWaterhouse. But if IB improves my fill price by just 1 cent a share for just half of my trades, IB’s fee is completely covered by the better fill price. So much of the time the market has been paying my IB commission for me. Oh, for stocks that have the bid-ask prices at the minimum (ie, 5.01 and 5.02), IB’s REL order has no way to improve the price. For such cases, I trade that stock in my TDWaterhouse account for its flat rate of $10.

Regards,
Brian

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Brian - I use TDW but not out of choice. I believe they only trade on the major exchanges, not the alternative exchanges, or at least that used to be the case. I have seen limit orders not fill for minutes when the price is under the limit even though the stock is fairly liquid. I have had cases where I don’t get a reported fill. Once I didn’t see a fill so I cancelled the order and repeated it and got a fill. I forgot about it and found out the next week that I was short several thousand shares. I lost a few thousand on that one.

Their UI is also 20 years behind the times. The amount of cash listed in your account is always one day old and often leads to problems for me.

You will also find that they keep a list of stocks that have suspicious trading activity. Many of the lower liquidity stocks that P123 picks are on the list. When this happens you have to phone them up to place the order… you can’t do it electronically. So far they haven’t charged me extra broker fees for the phone order because I complain about it.

I use TDW for two reasons. First is because I trade in my RSP which by law has to be a Canadian dollar account. To get around this, TDW has an option where you can keep all your cash in US money market. At the end of the day they calculate the difference between US stock buys and sells. On the settlement date they will either sell or buy the equivalent from the US money market and convert both to CDN $ or US $ while fixing the rate to be equal (i.e. you don’t pay the exchange rate spread which can often be ~1.5% or more). This whole process makes a mess of your trading activity summary. I really dislike this but I don’t see another way of doing it.

The second reason is a bit irrational but it is as follows: TDW has offices in most major Canadian cities. If I have a problem I can go into an office and discuss it with a real person. I also believe there is not much chance of them going bankrupt. I have fears about using an internet brokerage and they disappear overnight. There is no physical location to line up in front of to get my money out of :slight_smile:

Another option is RBC - this should be fairly equivalent to TDW. I’m not sure if they have the US option for RSPs as I described above. There is also Scotia iTrade (formerly E-Trade). This might be one worth chequing out. Questrade. IB - I heard IB had really poor service but that was a long time ago.

Steve

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RBCDI and most other Canadian brokers have separate Canadian and US subaccounts in registered accounts such as RSPs. No conversion of US dollars on buys, sells, dividends. TDW is a bit behind the curve on this one. They’ve been promising separate subaccounts for some time.

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Cool - I guess they changed the law. Looks like RBC was offering USD sub-accounts three years ago and TDW is still making promises. I’ll have to look into switching then.