# Is my stockbroker ripping me off?



## janeymc (24 Oct 2007)

Folks 
I have thought for a long time that I wasn’t getting the best deal in buying shares through my broker. My shares always seem to be bought at very close to the days high price. This is over 15 stock purchases in the last two years. I have not sold any stocks so am only talking about purchases.

I have investigated my latest trade one month ago and my stock broker said that 4500 shares were bought in a company @ €54.234 for me.
On top of this was stamp duty and certificate costs.

When I checked the highest price that day was 53.951

I looked at this on morning star, yahoo and the company who’s share I was purchasing website and they all confirmed the same number.

Am I being ripped off. This high lasted for 3 minuets. The price dropped after this high and the average for the day was €53.102

Can anyone help me understand where I'm going wrong if I am not being ripped off. The reason I am looking into this is because every time I have purchased shares they have always been purchased at or near the top of the days trading range irrelevant of when I placed the order (10am, 2pm, 4pm and 5pm).

Can I find a website that shows all individual trades of shares traded in any one day for a company. My broker told that they were bought in one block so I should somewhere somehow be able to see my block of 4500 shares @ €54.234 somewhere in this list. I am a long term investor in this stock and the difference in the long term is not relevant. But I hate feeling ripped off.

Thanks in advance for all advice.

Janeymc


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## room305 (24 Oct 2007)

*Re: my Stock broker ripping me off*

Why not purchase using a limit order? Whether you are being ripped off or not (as in Clubman's definition), it is clear your broker cannot get a decent price. I'd also hazard a guess that if your broker is Irish, they are probably not the cheapest either.

I pay $6.95 per trade with Firstrade, get dividends automatically reinvested for free and am very happy with their service. I don't pay stamp duty either - this limits the number of Irish shares I can buy but I'm not particularly bothered about that.


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## Brendan Burgess (24 Oct 2007)

Hi Janey

Have you asked the stockbroker? 

I doubt if you are being systematically being ripped off, but it's possible. What stockmarket are you buying the shares on? 

Brendan


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## efm (24 Oct 2007)

There are a couple of things to be aware of on how markets / brokers operate, and how much of an impact will depend on whether this is an Irish broker or not, and whether it is an Irish share or not.

Firstly your order is a very small order - normally for small orders a broker is allowed aggregate orders from different clients into one bigger order to try and get a better price from the counterparty. This could be why you are not seeing a single trade of 4500 shares.

Secondly, even with aggregated small orders the total block can still be very small - for small orders the "market price" can be different to what is quoted by the exchange (usually for private clients the more shares you buy the better deal you get).

Thirdly, if this was not a UK or Irish share, and the broker is Irish, he/she may have to go through another broker to purchase the shares - this additional broker can apply charges to any transactions undertaken - some brokers roll these charges into the bid/offer spreads they quote (ie they take the market price and add an extra % to the bid or offer).

Fourthly, as far as I know, any of the brokers could trade off their own book and mark it as a "put through" (I'm not sure if you can do that on the Xetra exchange for Irish stocks though) - in this instance as long as there is somebody quoting a price at the time then the broker can use that price.

Finally, you well within your rights to query any of the prices you received for your transactions - your starting point if you wanted to query them would be a letter to the Compliance Officer of the broker asking them to supply evidence that you received a fair and market price for each of the trades you are querying. If you don't get satisfaction with the Compliance Officer then you take your compliant to the Stock Exchange who will investigate further.

Any or all of the above may not apply in your case but it is worth knowing.


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## Brendan Burgess (24 Oct 2007)

A small order? €243,000 is the size of the transaction (4500 @€54 per share) . 

Unless it's €0.54 cents per share which would be €2,430

Brendan


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## efm (24 Oct 2007)

Brendan said:


> A small order? €243,000 is the size of the transaction (4500 @€54 per share) .
> 
> Unless it's €0.54 cents per share which would be €2,430
> 
> Brendan


 
Yup! It's more to do with the number of shares than the value - as an example for FTSE 100 stocks a normal order that would expect the quoted market marker price is 10,000 shares. (if my memory is correct) At a trade size outside of 10,000 the market maker is not obliged to honour his quoted bid/offer

Remember that the bulk of the daily volume on an exchange is from institutional investors and most exchanges / markets have evolved to reflect this.


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## shipibo (24 Oct 2007)

As you told him to buy shares, and did not specify " Limit Order" , so legally you have nowhere to go.

You can write a letter to ISE in town, detailing your issue, if they feel the case is strong enough , they have power to investigate.


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## efm (24 Oct 2007)

crumdub12 said:


> As you told him to buy shares, and did not specify " Limit Order" , so legally you have nowhere to go.


 
Effectively true but not whole story - a broker has a duty of care to provide "best execution" for it's clients, even on orders without limits - ie it must try at all times to get the best market available price for all trades.

What a broker cannot do is knowingly execute a trade at a price when he knows a better price is available - that is why I suggested that if the OP had a desire to take it further he/she should write to the Compliance Officer and request proof that the fair and market price ("best execution") was received.


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## MOB (24 Oct 2007)

"Fourthly, as far as I know, any of the brokers could trade off their own book and mark it as a "put through" (I'm not sure if you can do that on the Xetra exchange for Irish stocks though) - in this instance as long as there is somebody quoting a price at the time then the broker can use that price."

I know little enough about stock market practices, but the process very helpfully outlined above by efm certainly raises the possibility of systematic cheating by the brokers.

If the OP has had 15 share purchases, I rather imagine that the odds of these shares all being bought at or very close to the days high price by pure chance would be rather remote.    I would need to see that the Op means by 'very close to' , but I suspect that 15 share purchases is probably enough to allow somebody make a mathematically defensible finding as to the remoteness of the chance that this pattern (if there is a pattern) was just bad luck.  If the purchases were all in the €250k range, then I would certainly advise the OP to investigate further and perhaps instruct a solicitor.  

By way of rough guess, the losses would need to be in the order of €50k+ to justify legal proceedings.  If the evidence of malfeasance was (when collated) particularly compelling, you might take proceedings for a smaller sum.  It may be that one or other of the regulatory entities would take action on behalf of the OP.


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## room305 (24 Oct 2007)

Incidentally, could the OP check with their broker or the revenue to find out exactly how much SD was paid? Presumably this would have to be paid out based on the actual market price received rather than any fancy "put through" messing around by the broker.

I imagine it would certainly bolster your case if there was a discrepancy in how much SD was being paid to the revenue on your behalf and the price you purportedly bought the security at.

Either way, it would be the last trade I'd place with this broker.


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## janeymc (24 Oct 2007)

Everybody
thanks for your advice
I posted a large response earlier but it is now gone. here is a summary.

Dollar trade NASDAQ
I have had two simmilar sized trades but the rest mainly in europe have been €20-€50
The close to the market top I just calcualted as being 1.79 standard deviationa from the norm for the day. Sample is 15 though.
Not specifing a Limit order was and has been a mistake.
I do not trust the individual that I am assigned to deal with in the broker.
I do not plan to do any legals relating to this. I will investigate fully. I have educated my self with your responses to know exactly what I need to ask of the broker and will spend a week collecting other information on my previous deals before aproaching the broker.
I had already decided to move online and indeed any $  trades I will do through first trade. Aplication in the post yesterday.
I am a long term investor 5-20 years so I will survive the bad purchasing by my current broker.
I will keep an eye on any more that folks have to say and will post back when I am finished my investigations with my broker. It is important for me that the stock and broker remain annomious.
I thank you all for your advice.

Till later.

JaneyMc


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## efm (24 Oct 2007)

OK..a couple of points to aid / clarify some matters (apologies for the long post).
Janeymc – if the security purchased was not an Irish registered      plc then Irish Stamp duty is not payable – stamp of 1% is payable on Irish      Shares and of 0.5% on UK shares.  US      securities are not “stampable” instruments: ie the Irish revenue cannot “stamp”      the transfer of beneficial ownership and the IRS in the US      does not have an equivalent.

If the security purchased was a NASDAQ stock then it is unlikely      that the Irish broker is registered to deal on NASDAQ and so has to go      through another broker for execution – as I stated earlier the US broker      may well apply charges for completing the trade – you should clarify if this      is the case and if so what the charges were.

If the security is a US stock there would have been a currency      exchange involved – it would need to be clarified what exchange rate was      used, which broker applied the rate and how the rate was calculated (ie      was it set in the morning for the day or was it updated as the fx market      changed during the day) – it should also be clarified if the fx rate was      wrapped in the euro price you quoted

Another question that should be asked of the broker is the time      of execution versus the time the order was placed – was this order filled      in pre-market trading or after 14:00 GMT once the market      opened

MOB – For clarification – any “put through” trades (or OTC      trades on Xetra; or also called “own book” trades or trading off your book)      are reported to the market.  There      are slightly different rules around the timing of this reporting but      essentially all trades do get reported and so are open to scrutiny by the relevant      regulator and other market participants

You are correct to raise concerns over the “fairness” of such a      system that allows a broker to be both sides of a transaction, but the      reality is that operationally it will continue – it would be madness to      compel a broker to use a counterpart for every transaction; such a blanket      rule would be inoperable in any market.       Interestingly the upcoming MiFID regulations (1st Nov)      will address a number of market and broker transparency issues and      specifically deals with, among a myriad of other things, the reporting of own      book trades

You may well ask how such a process has been allowed to remain      but it may be useful to know that the broker profession was historically      built on a certain level of trust and ones “word” between members, with the      ultimate censure being the elimination of one’s good name and expulsion      from the market; similar in some ways to the legal profession

Finally, in my opinion, it is realistic of Janeymc not to      pursue legal recompense for potential mis-trading on the part of the      broker – it would be nigh on impossible to prove categorically that the      prices traded were not valid market prices at the time of execution.  Any trader worth his salt would be able      to come up with a valid reason for using a price at any given time.  That is not to say that Janeymc shouldn’t      raise it with the broker nor that the broker will dismiss it and not offer compensation if warranted but I feel it would be difficult to prove in court


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## ClubMan (25 Oct 2007)

efm said:


> Janeymc – if the security purchased was not an Irish registered      plc then Irish Stamp duty is not payable – stamp of 1% is payable on Irish      Shares and of 0.5% on UK shares.  US      securities are not “stampable” instruments: ie the Irish revenue cannot “stamp”      the transfer of beneficial ownership and the IRS in the US      does not have an equivalent.


Just to clarify - some _Irish _(and other non _US_) companies trade on _US _exchanges in the form of ADRs/ADSs which are treated like other shares on those exchanges - e.g. no _Irish _stamp duty (I seem to recall that all _NASDAQ _trades are subject to a 1/30,000th(!) of the value levy though).


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## room305 (25 Oct 2007)

Surely then if the broker is quoting SD costs to the OP, they are doing so fraudulently?


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## Brendan Burgess (25 Oct 2007)

I think it is more likely that the OP has misunderstood their contract note. 

Don't assume fraud until the broker has explained the story.

brendan


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## amgd28 (25 Oct 2007)

efm said:


> built on a certain level of trust and ones “word” between members, with the ultimate censure being the elimination of one’s good name and expulsion      from the market; similar in some ways to the legal profession



.........and look where this has got the legal profession......


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## MOB (25 Oct 2007)

"....it would be nigh on impossible to prove categorically that the prices traded were not valid market prices at the time of execution."

Hi efm.  This I take as a given; my point was as follows:

1.   The "best execution" duty to which you referred would be breached by a pattern of deliberately\ persistently buying at or close to the top of the price on a given day.   One can see how this might arise if the brokers themselves, or their more favoured clients, were selling the shares in question.


2.  Given a sufficient number of trades in which to discern and analyse such a pattern (if there is one), there would surely come a point where a competent expert (a mathematician or statistician I imagine) would be able to say to a court 'the odds of this being just coincidence or bad luck are too remote for us to consider credible - there was a deliberate strategy of maximising the purchase price\minimising the sale price on trades for this customer'

3.  I accept, of course, that a broker can easily justify one particular trade with ease.  I just wonder whether a broker would have such an easy time explaining 15 trades.  I don't know when it would arrive, but it seems to me that eventually, the preponderance of evidence would become mathematically indefensible.   Maybe it would take 30 trades or 100 trades (I wish I had a better intuitive feel for mathematics - I used to), but facts, as Ronald Reagan famously said, are inconvenient things, and numbers don't lie

If there are brokers out there who indulge in the sort of conduct alleged, I hope they are reading this.

Although it is not an area where I have any particular expertise, it does seem to me that there may well be more to this story.


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## MOB (25 Oct 2007)

.........and look where this has got the legal profession......

I know I am going to be sorry for saying this, but the legal profession in Ireland is one of the best regulated professions anywhere, and the level of protection which Irish consumers enjoy in their dealings with the legal profession, is on a par with any developed economy.  We paid for Jonathan Brooks; We paid for Elio Malocco.  If they have dipped into client money, we will no doubt end up paying the clients of the two solicitors currently in bother.  People were badly frightened and significantly inconvenienced by previous solicitor shut-downs, but nobody was left out of pocket.  Everybody got paid.  That's what we do, because we are indeed a profession.  

I accept the stockbroking analogy\comparison with the legal profession in a historical context, but as regards current regulatory issues, I have one word in rebuttal:  Morroghs. 

My practice is a general practice, with perhaps a slight bias toward high net worth individuals and a leaning toward second generation wealth.  I really don't have much first hand knowledge of what you might call the 'sharp end' of the legal profession.   But it does irk me at times to see such things as ;

1.  Good ol' Joe 'the peoples friend' Duffy 'breaking' the story of alleged overcharging on residential abuse cases, without any real acknowledgement that the story was in fact 'broken' a month earlier by the legal profession itself.  

2.  No real acknowledgment from Joe or his ilk that securing compensation for the victimised and marginalised in our society is something to which the legal profession has contributed far more (and risked its own resources in so doing) than any number of prime time specials.

3.  Perhaps I am unduly thin skinned, but where a rich person or company goes to court, the media never seem slow to comment on their use of well-heeled, expensive, high-flyer lawyers.  Where a refugee is at risk of deportation, or an autistic child is suing for the treatment they need, or a woman is suing for the removal of her ovaries, or a child handicapped at birth is getting to court (some 12 years later) to get compensation for their negligent treatment, I don't seem to see a whole pile of favourable coverage for the lawyers who take on such cases - often with little prospect of payment unless they win, often with potentially years of work ahead of them.   Some of them are of course in it for the money; but some of these guys are unsung heroes.  

One of the marks of a health democracy is a strong and independent legal profession.  Lawyers are expensive, and do not expect to be loved, but we should not take for granted the rights that we enjoy, and we should not be mean-minded in acknowledging the role that lawyers have played, and continue to play, in securing those rights.

rant over.


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## amgd28 (25 Oct 2007)

MOB,
I was just being cynical in light of the recent cases

On a serious note however I think the time for peer regulation should be at an end, as it leaves a profession open to abuse by the odd bad apple. You will always have individual cases of abuse in an industry or profession, but rightly or wrongly, public confidence is undermined when they cannot see an independent arbitrator. This is true of the Gardai, Estate Agents, the law profession and many more.

It is precisely because of the hold that "good ol' Joe Duffy" has over the masses that a profession needs to protect itself by pointing to an independent oversight. If logic and facts ruled the world things would be great, but public perception is a massive force and it needs to be acknowledged.


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## MOB (25 Oct 2007)

'  but public perception is a massive force and it needs to be acknowledged.  '

Hi amgd28. No argument there.  Thing is, the legal profession is not 'peer regulated' in any substantial sense.  As a profession, we have several layers of regulation, and were to the forefront in getting lay\non legal people involved in regulating us.  The Director General of the Law Society constantly states that we have a good story to tell, but nobody prepared to listen to it.   

I really don't know the answer to this - perception management is one of those things which seems to be important, but it still makes you feel kinda dirty to do it.   I would love it if we could simply keep doing the right thing and let public perception catch up, but it doesn't seem to work that way.


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## janeymc (1 Nov 2007)

My broker has told me that the average purchase price includes their % and that this is why it is near or at the top.

It does explain things to me. I find it strange if not weird that thye would include this in a price and not as an extra line item. E.G. commision for purchase of shares or something like that.

They also provided me with a graph of share prices during the day and these prices also included their commission. I find it unusuail as I know that different people pay different commissions.

there you go.

I posted this response before Brendan but it appears to have not made it onto the board.

thanks all for your time and feedback. IT is much apreciated.

Brendan this is a fantastic site. Would you not go world wide with it and make some money. Float it and I'll invest.

Janeymc


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## mercman (1 Nov 2007)

MOB has replied as a true professional, and I do not wish to cast aspersions against him. His profession is been embroiled in a 'wake up call'. How many more will there be? In fact how many will meet the Public Domain ? 

However, in the past 5-7 years Joe Public has become taken over by the boys in Suits. The legal profession in this country are very simply - money grabbers. Sorry MOB, but this is the way it is. I use the legal eagles very frequently and most times I have to barter my fees - sounds very professional doesn't it - and times I have not / forgotten to barter I have been ripped off by the same firm or to be told that they are unable to place an estimate on fees. 

I could write a book on inadequacies by the legal profession, including madness which the Law Society will not act upon. 

And another book on Banks and another on Stockbrokers, where this story commenced first. I trade shares daily and I refuse to use an Irish Broker. The best is one of the on-line brokers, selftrade.co.uk or the likes. For US markets there are a heap of them


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## PMU (1 Nov 2007)

janeymc said:


> My broker has told me that the average purchase price includes their % and that this is why it is near or at the top.
> 
> I find it strange if not weird that thye would include this in a price and not as an extra line item. E.G. commision for purchase of shares or something like that.
> 
> Janeymc



Why didn’t your stockbroker tell you the fee structure and how it was applied before you opened the account?  They are legally obliged to do this.   

Also, the FSRA recently issued a publication ‘Cost survey - stockbrokers fees and charges’. This seems to have disappeared off the ifsra.ie web site but nowhere do I see on my copy a note that any stockbroker charges their fee as part of the spread.

  [FONT=&quot]Also if the fee is not distinguished from the price how can you correctly make a CGT return on disposal of shares?  You need to remove the acquisition and disposal costs to calculate correctly your CGT liability. [/FONT]


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## ClubMan (1 Nov 2007)

PMU said:


> Also, the FSRA recently issued a publication ‘Cost survey - stockbrokers fees and charges’. This seems to have disappeared off the ifsra.ie web site but nowhere do I see on my copy a note that any stockbroker charges their fee as part of the spread.


You mean this?

*cost survey stockbrokers fees and  charges

*Found it via _Google_.

Update: oh - it's telling me that it's a corrupted _PDF _but if you use _Google _you can still fine other traces of this survey.


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## markowitzman (2 Nov 2007)

why would you use a stockbroker rather than a direct low cost broker online?
As previously mentioned limit order would solve this. Some of the online brokers use trade triggers where one can set the scenarios for a buy/ sell to be triggered.


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## room305 (2 Nov 2007)

PMU said:


> [FONT=&quot]Also if the fee is not distinguished from the price how can you correctly make a CGT return on disposal of shares?  You need to remove the acquisition and disposal costs to calculate correctly your CGT liability. [/FONT]



This is a fairly important point and I wonder if the broker is trying to cover themselves? It would seem to me that the stockbroker should quote the two separately (I know mine does) and would be inclined to write to the financial regulator about the matter.


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