UPDATE: TD Ameritrade has said it is now working to correct the issue discussed in this article and has promised a price correction on this particular order.  They said that the complaint went to the wrong department due in part to the restructuring of the company related to the merger between Thinkorswim and TD Ameritrade.

As a seasoned investor, I have developed many habits.  One of them has been sticking with my original retail broker, TD Ameritrade (TD Ameritrade Holding Corp.).  I have put up with a lot of their system’s quirks and I am presenting a recent example for those who are shopping for professional online brokers:

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I was assigned 98,100 shares short of Citigroup from an option position I took on the previous day.  In the morning I was asked to buy back the assigned short position by near the end of the business trading day because Ameritrade could not locate shares to borrow. No problem, I had done this successfully several times before.

That same morning, I put in an order to buy back 40,000 shares of Citigroup and it executed without any issue.  I also called to discuss my margin requirements and to get a better understanding of what I could do after I closed out the rest of the short position, given my account value.

I found an ideal moment to take care of the rest of the short position and I put in an order at 1:55 19 seconds CST to buy 58,100 shares of Citigroup at the asking price of $3.06.

Wait, what?  The order was rejected by the online system, with a message saying I did not have the necessary funds to place the trade.

Necessary funds?

This was an order to close my position, and I had even done the exact same order earlier in the day, so I thought it was a mistake.  At 1:55 48 seconds I put in the order again.  The trading ask price at this time was still $3.06.  Again, I got the absurd message not accepting my order.  I tried again with a slightly different amount (50,000 shares) at 1:56 34 seconds.  Rejected again.  While I was frantically trying to put in this order that was not being accepted, I called customer service.  I later reached someone who put in the order at 2:04 16 seconds, about 9 minutes after my initial order.  The ask and bid on the stock had moved away from me by the time the representative “pushed” the order through, which also took extra time.  The order never filled and the stock ran.

30 minutes later, Ameritrade forced a buy of those 58,100 shares at $3.15, costing me $5,229 - the difference between the price Ameritrade bought back the shares versus the price I actually put in the order for.

TD Ameritrade failed me on the timing of my order in several ways:  1) the same type of order was accepted online without issue earlier in the day, 2) representatives told me to cover the position and never asked me to call in the order (why should they?), 3) the very fact that their system would EVER reject an order to close out a position is absurd and obviously needs to be fixed (they had some kind of bureaucratic excuse for this and did not even express a desire to fix the issue) 4) when I put in the order, the price matched the bid for plenty of time and should have been executed at that price.

I have spent countless hours over the years dealing with TD Ameritrade’s quirks and find customer service to be more and more difficult over time.  I demanded $5,229, because TD Ameritrade was  100% responsible for the lack of execution of my order.  That same month I had even spent well over $5,300 in commissions to them.  What did they end up offering me after time-wasting conversations, letters and arguments?  Some free trades worth much less than the original demand.

I have not properly done my homework when it comes to online brokers, out of habit.  But it’s obvious to me and should be to any rational person that an online broker should never reject an order to close out a stock position.  TD Ameritrade said their system does this and that and had an excuse for why this mistake happens within their system.  But there is no excuse.  An online broker should be a middle man between a person’s computer and the market maker, not a roadblock.  Too many times for me, recently, TD Ameritrade has been a roadblock.