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Etrade Penny Stock Fees. Etrade OTC Stocks Trading.


2019 Etrade penny stock commission, fees charged for buying pink sheets/OTCBB/stocks priced under $1. Rules and policy. Is Etrade good for penny and OTC stocks trading?


Does E*Trade Offer Penny Stocks?


Yes, investors at E*Trade will find a good selection of over-the-counter stocks available for trading with the broker’s technology. OTC securities tend to have lower volume and less liquidity than equities that trade on one of the major US exchanges. This creates an environment that is much more volatile and risky. Also known as penny stocks, OTC equities can be boom or bust.



E*Trade Penny Stock Fees


E*Trade penny stock commission $0
E*Trade active trader discount $2 lower commission for clients making 30+ trades per quarter
E*Trade penny stock surcharge $0
E*Trade large order surcharge $0
E*Trade ECN surcharge $0.005 per share surcharge on extended hours trades (ECN fee) and on trades executed through E*TRADE Pro at an ECN during both regular market and extended hours sessions


E*Trade stock and ETF commission is $0 per trade, options commission is $0.65 per contract (drops to $0.50 if making 30+ trades per quarter). E*Trade and firms in the Best Penny Stock Brokers list do NOT have surcharges and additional fees on Pink Sheets/OTCBB/stocks priced under $1.




Comparison


TD Ameritrade’s penny stock screener can search specific exchanges, including the OTC markets. Because E*Trade doesn’t offer this capability, finding penny stocks is rather difficult.

On the flip side, E*Trade customers don’t have to pay a surcharge to trade OTC stocks. Ally Invest, by contrast, charges 0.5¢ for stocks that trade under $1.

Merrill Edge traders must have at least $25,000 in assets before they can start trading OTC securities. And even then, the broker doesn’t allow more than 20% of an account’s value to be in penny stocks. E*Trade has no such requirements.



OTC Stocks Available at E*Trade


The E*Trade stock screener returns over 2,000 stocks that trade under $4. Unfortunately, the broker’s screener doesn’t have the ability to search exclusively for securities that trade on OTC exchanges.

One example of a penny stock that E*Trade (member of FINRA) customers have access to is 3PEA International, Inc. This security trades on the OTCQB market, and its ticker symbol is TPNL. Its most recent trade price was $0.42. It does not pay a dividend, although it does provide financial statements.

A second OTC security that appears in E*Trade’s screener results is Aerius. The ticker symbol is AERS. The stock’s profile page does not show any news, but Aerius’s average volume is above 30,000, a good number for a penny stock. Its last trade price was less than 1¢.



Buying a Penny Stock on E*Trade


E*Trade does not charge any additional fees for OTC trades. The broker’s regular $0 commission applies. Penny stocks can be traded on the website, the broker’s mobile app, and its desktop platform. Unfortunately, the E*Trade site doesn’t have a trade bar.


ETRADE Penny Stocks Trading


When you’ve found a penny stock you want to buy or short, submitting the order is just as easy as placing a trade for a regular stock. Clicking on a buy or sell button on the stock’s profile page produces an order entry form. Both market and limit orders can be used.



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Can You Short Penny Stocks on E*Trade?


Short selling of OTCBB and Pink Sheets on E*Trade is not allowed.



Thinking About Buying an OTC Stock on E*Trade? Read This First!


While major stocks in the United States trade on an exchange such as the New York Stock Exchange or the American Stock Exchange, OTC stocks do not. Instead, over-the-counter securities trade through a dealer network. Penny stocks also tend to be riskier with greater volatility. If you think you are ready for this tumultuous world, TD Ameritrade has some good resources.


Major Exchanges Versus the OTC Market


If a company wants to list its stock on the New York Stock Exchange, it must meet some pretty stringent requirements. For example, it must have a market cap of $200 million or higher. It must also have at least $75 million in annual revenue, and a shareholder’s equity of at least $60m. If the stock does not meet these and other requirements, it cannot get on the NYSE. Other major exchanges have similar rules. While Nasdaq began as an OTC marketplace, today it is considered a major exchange.

Once a stock is listed on one of the big exchanges, it must continue to meet various standards. One of these is a minimum share price. On the NYSE, the floor is $4. If a stock goes below this amount, it will be delisted.

While many stocks will not be able to meet the pre-listing and on-going requirements of the major exchanges, investor interest in these securities remains high. Because demand still exists, there is an over-the-counter market where traders can buy and sell penny stocks.

The OTC market breaks down into a few areas. There is the OTCQX market. Here, companies pay less for listing compared to the cost of getting on a major exchange. The OTCQX also has less demanding requirements.

The OTCQB is another over-the-counter market. This has replaced the OTC Bulletin Board that was used as an exchange for many years. The QB has less stringent requirements than the QX maintains. A stock must have a bid price of at least 1¢ to be listed on the QB.

The Pink Sheets have no listing requirements at all. Companies on the Pink Sheets do not have to be registered with the SEC, nor do they have to provide audited financial statements.


E*Trade Penny Stocks


While the SEC defines a penny stock as any equity trading below $5, most traders use the term to refer to a security under $1. Since this amount falls below the NYSE’s listing requirement, penny stocks typically trade on the OTC market.


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Hazards of Trading Over-The-Counter


With less regulation and information, there’s a lot more risk in trading OTC stocks. These securities failed to get on a major exchange for a reason, or more likely, several reasons.

Because there is less government regulation of the OTC marketplace, all sorts of over-the-counter securities will appear, some of which may not be completely legitimate. These organizations can include shell companies, fraudulent enterprises, unknown foreign entities, and more.

Penny stocks will have less liquidity and volume. If you buy an OTC security and then decide later that you want to sell it, you may have a much more difficult time finding a buyer compared to a stock listed on a major exchange.

With less volume, the security’s bid-ask spread will also be much wider. You buy at the ask price, and sell at the bid price, which is always lower than the ask. The larger the spread, the more expensive it is to trade the stock.


Recap


Trading OTC stocks on Etrade is very hazardous. The Etrade Pink Sheets in particular have seen their share of criminal activity over the years. Only the most sophisticated and experienced traders should venture into such a risky trading environment. If you think you’re ready, TD Ameritrade has good resources. And be sure to make your investments only with risk capital, i.e., money you can afford to lose.