The Discount Broker

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There are 3 groups of people working at a discount broker branch: supervisors (or sups), licensed reps and unlicensed reps. The licensed reps include those who have completed their options license (typically 3-6 months after the regular license), and the regulars who are licensed for equity and m/f trades only. The sups focus on monitoring call-levels, problems, and other administrative issues.
Cash As the name implies, you need to settle your accounts in cash, usually within 3-days of any trade. Broker will not advance any loan, and you cannot trade options.
Margin The broker will lend, at prime + 1-2%, upto 70% of the value of the shares. You must have margin room before making any trade: keep at least 20% margin spare.
For example, if you buy 1000 shares of Nortel (NT:T/N) at $30 each, you will only have to put up $9000, and the broker will lend you the balance of $21000. What happens when the price moves up or down?
If required and approved, margin accounts can be enabled for options trading. Options are not marginable.
Short For shorting eligible shares - these are really a special class of margin accounts. Brokers will aggregate the margin in all margin and short accounts.
Special Includes tax sheltered accounts (e.g. RRSP and RESP in Canada) and sweep accounts.
9:00 - 5:00 (Eastern) is usually the busiest time of the day.
Avoid calling the broker with account administration issues during this time. Examples include:
- statement requests
- RRSP deregistrations
- account transfers
- swaps, journals
- DRIPs, SIPs
On busy days, everybody is glued to their headsets and terminals, taking breaks either to get their trade printouts, speak to the sups, follow-up on customer requests, or respond to nature calls. Food is catered round the clock - tasty and decidedly not cholesterol-free, but there is hardly enough time to enjoy it. Notes:
1. Canadian discount brokers will allow you to open separate C$ and US$ cash, margin, and short accounts.
2. Keep Canadian stocks (i.e. those that trade on Canadian exchanges) in your Canadian account, US stocks in your US account. This will save you from needless currency conversions. (Note: Some stocks on Canadian exchanges trade in US$.)
3. You can trade interlisted stocks (i.e. those that trade on multiple exchanges) on any exchange.
All calls are recorded. If you have a specific problem, try to provide as exact a time as you can. It helps in the tracing process.
Do not try to put one over the broker - it will get logged, and could result in your account being removed.
Most of the reps are very young, but conscientious and diligent, even when they are being screamed at by ticked-off customers who have been on the receiving end of busy signals for 30 minutes or more. Orders

Market A market order means that you want the shares/options at the best possible price. The price may or may not be the best bid/ask, or even in the current range, but you are guaranteed a fill of your order during the day (provided the security is trading and sufficient quantities are available).
For odd lots, expect the price to be different than the quoted bid/ask. This is particularly true for OTC and illiquid securities when it is advisable to place limit orders.
Limit A limit order means that you want the shares/options at a specific price within a specific time period. Here, you are not guaranteed of a fill, but if one occurs, it will be at your price or better.
On-Stop The on-stop BUY (or stop-buy) and on-stop SELL (or stop-loss) orders are triggered once the STOP price is reached. At that point, the order becomes a market order, unless a LIMIT price is specified, in which case it becomes a limit order.
Note: in a fast moving market, there is absolutely no guarantee that your order will be filled at exactly the STOP price.
Short Short-selling means that you are selling shares that you do not own, in the expectation that the price will drop, and you can buy them back at a profit. You can only short-sell in a short account, and margin room must be available. You must sell in even lots, and the security must be "shortable". You cannot have long and short positions of the same security in the same account, although it is possible to protect positions using options.
The most important thing in dealing with problems - trade execution, server access, wait time &c - is to stay calm. Do not yell at the poor rep who answers your call, but get his/her name and location for tracking purposes.
If a mistake has been made, you will be compensated. But you need to approach the problem in a methodical manner: ask to speak to a sup, tell him/her the date & time of the call, describe the problem, request a trace, and get his/her name and branch-id.
Typically, the sup will investigate the problem, listen to the tape (if applicable), and report back to you within a day.
The training includes completing courses required for licensing, customer care lessons (how to answer a call, how to deal with a problem), and the trading mechanics (entering buy orders, using the wire system etc). The typical time span from being hired to being licensed is about 3-6 months. Discount brokers typically do not provide advice, concentrating instead on account management and trade facilitation.
1: From the author's personal observations (over a 6-month period in 2000) at a major discount broker.

© C. Basu, 2001.