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The NSCC charges aren't 10 times or 100 times the value of the trade.
If I've understood well, when dealing with illiquid securities the clearing firm has to deposit an amount of cash at the NSCC which may be 10 or 100 times the value of the trade until the trade is actually settled (typically at T+3).
However, I think Penson's "countermeasure" (directly rejecting orders > 25% 20-day ADV and buying-back the shares if the NSCC requirement exceeds $50,000) could be considered ILLEGAL as it indirectly causes a DOWN-SPIRAL VOLUME MANIPULATION on sub $1 stocks. Here is the proof:
Let's suppose a low float Pinkie (stock ticker: CRAP) which trades around @ $0.005 per share. If traders and shareholders of CRAP happen to be using Penson-clearing brokers, the share volume they'll be able to trade will shrink each day, eventually becoming zero.
Also, after a period of small or no activity the stock can become impossible to trade. Might be worth telling FINRA.
$GPGD DTC-CHILL -- RED ALERT!!!
$GPGD is currently Chilled for Deposit by the Depository Trust & Clearing Corporation, confirmed by eTrade (self-clearing), Zecco (Penson), and Just2Trade (Legent Clearing).
Under a DTC-chill, the stock is labeled NON-DTC eligible, and trades have to be settled IN PHYSICAL CERTIFICATE FORM.
That implies selling GPGD shares will incur in HUGE fees that can be as high as $700 per transaction, with multiple charges in the case of partial fills.
My stock GPGD currently has been labeled as NON-DTC eligible (it was). According to Just2trade (so far the most specific reply) it's "chilled for Deposit" at the DTC.
GPGD is a POS but it isn't the typical scam company as the pumping and stock sales are next to none; Volume always has been an utter joke with some very sporadic PRs which induce an one-day spike whose volume is insufficient to raise any real money.
What it happens is that since insiders (Simon and Greg Rubin) own nearly all the shares they run it as a private company and likely to be doing so in their spare time, that's why there is very little activity, next-to-no updated info and the IR sucks bigtime. Probably their Transfer Agent died too and they didn't notice ROFLMAO.
That measure can do far more harm than just "slowing down volume" from dilutive activity: it can literally drive volume down to zero. If order sizes > 25% ADV are outright blocked (Zecco's implementation is this radical), the size of the orders accepted by the trading platform go down exponentially as average volume gets lower each day. If a stock has days of low activity or no activity, the stock inevitably dies unless activity from non-Penson brokers come into the scene.
In a Spanish forum I've already reccommended some guys to stop trading OTC/Pinks and sub $1 stocks for a while until the witch hunt is over. Penson is the one leading the slaughter but it's likely that others follow 'cos the NSCC is behind this. The NSCC illiquid requirement is just plain nuts.
Fidelity is self-clearing, and so far is the only broker known to accept incoming transfers of penny stocks.
So far you were right on selling given the current DTC mess it fell into. However how did you notice that something was not right?
Hey why do you ignore my messages? You could at least reply back!
Well. I think this can trigger quite a bunch of reverse splits so they can continue being crappy companies but trading in the small dollar per share range.
To the Cayman Islands!
Chatted with a ETRADE rep to confirm the rumors. NON-DTC eligible ouch.
You might be able to buy and sell but the company has to set the paperwork in order...
Seems like different brokers do stuff differently, but the DTC chill info was from Legent Clearing, not from Penson which I know it has become a nightmare for penny traders.
The NSCC illiquid requirement is likely to hit everyone sooner or later, although Penson has been the first one to implement it.
DTC-CHILL WARNING DO NOT SELL $GPGD SHARES!!!.
I've mailed Just2trade (which uses Legent Clearing instead of Penson) just to be sure. GPGD is under a DTC-chill.
humbleboss, now that you called to their IR (I'm not an english speaker so I can't do anything there) could you help addressing them a VERY important issue to keep this stock tradeable?
The NSCC (National Securities Clearing Corporation) has imposed a rule whereas if a investor sells a block bigger than 25% of the average daily volume (calculated over the last 20 days) of the stock, the shares will be bought back. Penson clearing has already started blocking sell orders bigger than 25% ADV (which on GPGD means about 40000 shares per day right now), and I'm told it's going to be applied INDUSTRY WIDE...there is a witch hunt to curb down the Pinks as we know them now, specially those illiquid ones which aren't kept with filings up to date.
As far-fetched as this sounds, this mess can only be solved by getting their status on the Pink Sheets updated and a super reverse split (plus an authorized share reduction would help) so the stock gets trading over $1 per share so the NSCC illiquid requirement doesn't apply.
Got caught in this mess with Zecco and $GPGD which also was improperly listed as non-DTC eligible by Penson (as a Scotty rep told me it's DTC-eligible).
I was about to send a complaint to FINRA but I'll have to wait & watch a little more cos the rabbit hole is deeper than I first thought. I'd like those affected by the whole NSCC illiquid thing and/or those caught in stocks which "as a coincidence" become non-DTC eligible right after they're bought, to get together in a (free-access) iHub thread to further discuss this issue.
Look at their excuses (on two messages):
Yes it seems to be the NSCC requirement. On $GPGD sell orders up to 30.000 shares are accepted (which is a rather ridiculous amount).
I've messaged their customer support; I just want to be able to set a sell order in one piece; if Penson has to buy in the shares it's ok with me as long as I'm the one setting the price.
For me it'll take a while to close the account (in which I only left less than $30 in cash for sell'n'GTFO commissions) as I've been caught in a MAJOR mess...
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=67828943
I own 405.000 shares of $GPGD. With a expected merger coming soon, this mess could involve several thousand dollars if they prevent me to freely trade it.
Seems like I got caught in a worst case scenario:
- My stock $GPGD has IMPROPERLY been labeled NON-DTC eligible by Zecco RIGHT AFTER I bought my load of shares (it's actually DTC-eligible as confirmed by Scottrade, I also browsed the DTCC website documents and there was no DTC-chill or whatever for $GPGD).
- I am an international customer (Fidelity only applies to US customers) so I can't TXfer my shares there.
- Zecco has blocked me from placing online sales for $GPGD...with a merger coming soon.
- Due to language issues I cannot use the phone, only chat/email/messaging.
If they don't fix this issue asap I'll have to go the FINRA/SEC complaint route.
WTF Zecco has blocked me from setting up a sell order!
PD: ROFLMAO what a bunch of %#@%heads! Buy orders are ACCEPTED, sell orders REJECTED.
GPGD NEAR MERGER grab your cheapies before it goes nut$$$$$!!!!!!!!
$0.0028s taken.
GPGD $0.0028s cleared WATCH OUT this one is near merger
I don't short anything roflmao. What I meant is that I still have got some $GPGD shares that I'll sell when the merger gets announced an the stock goes ballistic (left $29 or so for commissions); once I'm done bye bye Zecco.
GPGD going to CLOSE MERGER presumably before this year ends. $0.0028 ask cleared, now $0.0029.
Hey! Thanks for the alert, however I only can go on the sell side right now as I'm currently moving out of Zecco; I already pulled all my purchasing power from the account given their recent "politics" about microcrap stocks. Bad for them, this new CEO ain't doing things right.
$GPGD ASK $0.0029!!!
GPGD $0.0028 ask hit, MERGER WITH A MINING COMPANY IN THE WORKS!!!
GPGD near merger, ask hit at $0.0028 ALERT!!!
Can someone post full L2 depth for $GPGD please?
Boring week this one we had.