Dear Valued Client,
Our clearing firm, Penson Financial Services, has recently notified us of an upcoming change to their policies in regards to illiquid securities.
Penson has conducted further research into recently increased illiquidity fees charged to them by The National Securities Clearing Corporation (NSCC), which provides clearing services for virtually all broker-to-broker equity trades in the United States. Though it has been determined that the majority of these charges are derived from sub-penny transactions, transactions that are greater than 10% of the 20-day average volume within any security, regardless of its price, also result in charges from NSCC.
Effective October 1, 2011, you cannot trade in excess of 10% of the previous 20 business day average trading volume of any OTC Bulletin Board (OTCBB) or Pink Sheet security, on any day, regardless of the stock's price. In addition, for stocks trading below $1 per share, you cannot trade more than 25% of the current day's trading volume.
If you trade in excess of these restrictions, your account may be subject to closure and/or be charged interest during the three-day settlement period of the illiquid trade. The interest charges will be based on the 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% and 25% per year, assessed at a daily rate during the trade settlement period. In no event shall any rate be charged in excess of the maximum rate permitted by law.
These interest charges may be substantial and disproportionate to the value of the trade. We are therefore strongly urging our clients not to violate the trading limits listed above.
This is not a change made by Stock USA. These steps are being taken by our clearing firm to help reduce NSCC charges incurred by them. We believe that the NSCC has raised illiquidity charges in response to regulators' concerns. The charges are designed to reduce unwanted trading behavior, such as unregistered distributions and manipulation. The goal is to improve trading in the OTCBB and Pink Sheet markets.
If you have any questions, please feel free to contact us.
Best regards,
The Stock USA Team
LOAD THE BOAT
