Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Morgan Stanley to Buy E-Trade for $13B

nytimes.com

Post reply on HN
Print view View original

41–50 of 115 posts

Re: Morgan Stanley to Buy E-Trade for $13B

#41

Post by hcknwscommenter »

auntienomen wrote: post #18
rwmj wrote: post #16

Earlier quoted context omitted.

> 'That's the high frequency traders. As far as I know, Robin Hood sells its customer orders to this kind of parties. Is this front running (and hence illegal), or do they mean to say customer trades, or something else?

They sell the order flow. It's not front running.

The entity selling the order flow is not front-running, but the entity buying the order flow (market maker, HF trading firm) is basically front-running. It's just that the front running is done in a way to actually lower prices or increase liquidity for the underlying trades in the order flow being sold.

Re: Morgan Stanley to Buy E-Trade for $13B

#42

Post by awinder »

thebiglebrewski wrote: post #4

Aw man, I just got moved from Capital One 360 Investing to E-Trade. Now I'll have to move to Morgan Stanley? Any way to just transfer my sh*t from E-Trade to Robinhood without just selling and re-buying, incurring a change in tax status? Seems Robinhood has unfortunately sunset that option...

I think you're going to be quite OK for a while at least, it looks like the current e-trade CEO would end up running the E-Trade unit inside of Morgan Stanley at least for a while. If they ever merged e-trade accounts into Morgan Stanley, I'm sure it'd be a no/low-touch thing, they'd be risking too much to make all those e-trade accounts liable to churn.

Totally my opinion but I'd stay away from the upstarts like M1 & Robinhood (saying this as a current M1 customer). With free trades from e-trade / schwab / td / etc. it just doesn't make sense anymore, and things seem to move way slower (for instance, I think M1 just today has their tax data integrations going live, but large shops have been set up for longer). I know some people like Robinhood and the stripped down interfaces but if you're already comfortable with interacting with the large-shop software (which I assume you are, going through e-trade and capital one), you're gonna get a lot more from that side of the market than the upstarts.

Re: Morgan Stanley to Buy E-Trade for $13B

#43

Post by hcknwscommenter »

frockington1 wrote: post #17
thebiglebrewski wrote: post #4

Aw man, I just got moved from Capital One 360 Investing to E-Trade. Now I'll have to move to Morgan Stanley? Any way to just transfer my sh*t from E-Trade to Robinhood without just selling and re-buying, incurring a change in tax status? Seems Robinhood has unfortunately sunset that option...

Robinhood has terrible order execution. I switched to TDA after getting sick of limit orders executing nowhere near my limit price. Market orders were abysmal as well

" limit orders executing nowhere near my limit price"

How is that possible/legal?

Re: Morgan Stanley to Buy E-Trade for $13B

#44

Post by omarhaneef »

sparkling wrote: post #36
omarhaneef wrote: post #10

I rely on Matt Levine to explain, more clearly than I could, how brokerages make money ("The Trades Will Be Free Now"): https://www.bloomberg.com/opinion/articles/2019-10-02/the-tr... Let me highlight a key passage: "Even this understates the change, because the actual way that stock brokers work today is that you keep some cash in your brokerage account to fund potential trades, and the broker earns interest on that…

> you keep some cash in your brokerage account to fund potential trades, and the broker earns interest on that cash What if the US joins the negative/penalty-interest club like the Eurozone countries?

Great question.

I will point out that most of the money is made in the overnight REPO market, and those rates seem to be shooting higher even as the interest rates are cut.

I know, I am his biggest fan, but this is Matt Levine again on the REPO rates:

https://www.bloomberg.com/opinion/articles/2019-09-30/a-repo...

Re: Morgan Stanley to Buy E-Trade for $13B

#45

Post by sseveran »

hcknwscommenter wrote: post #41
auntienomen wrote: post #18

Earlier quoted context omitted.

They sell the order flow. It's not front running.

The entity selling the order flow is not front-running, but the entity buying the order flow (market maker, HF trading firm) is basically front-running. It's just that the front running is done in a way to actually lower prices or increase liquidity for the underlying trades in the order flow being sold.

It's not basically front running. Front running is specifically when a broker gets your order and sits on it until either they or another client can trade in front of it before the market moves. Market makers want to interact with retail orders since they typically don't have size and in aggregate are either non-directional or predictably directional. This reduces the market makers risk of adverse selection.

Re: Morgan Stanley to Buy E-Trade for $13B

#46

Post by hartator »

omarhaneef wrote: post #10

I rely on Matt Levine to explain, more clearly than I could, how brokerages make money ("The Trades Will Be Free Now"): https://www.bloomberg.com/opinion/articles/2019-10-02/the-tr... Let me highlight a key passage: "Even this understates the change, because the actual way that stock brokers work today is that you keep some cash in your brokerage account to fund potential trades, and the broker earns interest on that…

It’s not complicated. They sell the actual transactions to other companies who make money on each stock spread.

Re: Morgan Stanley to Buy E-Trade for $13B

#47

Post by MR4D »

frockington1 wrote: post #22
markvdb wrote: post #7

Earlier quoted context omitted.

There was a somewhat revealing interview by the people behind Flatex, a big discount broker from Germany [0]. Dutch source, do use a translator https://www.tijd.be/markten-live/nieuws/algemeen/nieuwe-eige... "Is it easier for a pan European company to keep big US competition like Robin Hood and Ameritrade out? Niehage: 'The companies you name are very badly positioned for Europe. Their economic model is based on two…

With 0% interest rates in Europe, do you think this will encourage large savers to get their money invested? I think the idea of negative interest rates is absurd however it might encourage Europeans to invest more money versus stashing in savings accounts

With the dollar getting so strong and since we are now post brexit, I expect capital flight.

The people running the show have zero understanding of how banking works. And no, I’m not being arrogant - negative rates destroy capital, which is not what you want in a bank.

If you look at the largest European banks, they are all very weak (due to many factors, not just this one). However, negative rates is making them weaker.

Further, the aging demographics of Europe are going to continue to drive lower and lower growth.

In sum, I believe that all of this will cause smart money to leave Europe. At least in part as a hedge if nothing else.

Re: Morgan Stanley to Buy E-Trade for $13B

#48

Post by bb123 »

petilon wrote: post #21

If you're considering using E-Trade you may want to consider that E-Trade does not take responsibility if they are hacked. They group cybersecurity events and software malfunction under "Force Majeure" events ("acts of God"). That means if your retirement savings vanish because they are hacked you're out of luck. See https://content.etrade.com/etrade/estation/pdf/10118customer... Fidelity and Vanguard don't have such…

How can this be legal? Surely they have a duty of care to their customers.

Re: Morgan Stanley to Buy E-Trade for $13B

#49

Post by basch »

hartator wrote: post #46
omarhaneef wrote: post #10

I rely on Matt Levine to explain, more clearly than I could, how brokerages make money ("The Trades Will Be Free Now"): https://www.bloomberg.com/opinion/articles/2019-10-02/the-tr... Let me highlight a key passage: "Even this understates the change, because the actual way that stock brokers work today is that you keep some cash in your brokerage account to fund potential trades, and the broker earns interest on that…

It’s not complicated. They sell the actual transactions to other companies who make money on each stock spread.

Schwab earned 1.4% of revenues from payment for order flow

Schwab earned 57% of revenues from net interest on cash

Re: Morgan Stanley to Buy E-Trade for $13B

#50

Post by lordnacho »

hcknwscommenter wrote: post #41
auntienomen wrote: post #18

Earlier quoted context omitted.

They sell the order flow. It's not front running.

The entity selling the order flow is not front-running, but the entity buying the order flow (market maker, HF trading firm) is basically front-running. It's just that the front running is done in a way to actually lower prices or increase liquidity for the underlying trades in the order flow being sold.

No it isn't. I've worked at an HFT, this is not why they buy the order flow.

Retail order flow is worth buying because it's what's called "non-toxic". That means the retail traders generally don't know which way the market is going, ie they are either wrong or too small to make the market move against the market maker.

Contrast that to trading against a hedge fund which might have a better clue and is potentially large enough to push the market in some stock.

Post reply on HN