Will Schwab Sink or Swim with ThinkOrSwim?
October 30, 2023
Amid reports that Schwab intends to terminate its StreetSmart Edge trading platform in favor of TD Ameritrade's thinkorswim ("TOS"), it's likely that many Schwab day-traders will be unsettled by the transition and close their accounts. Is Edge without its detractors? Absolutely not. Is TOS a better product than Edge? Perhaps. A recent FINRA Arbitration Award presents us with a customer's allegation that despite entering a stock trade, TOS executed it as an options trade. Hopefully Schwab will slow its roll before decommissioning Edge and will carefully consider the online complaints posted by unhappy TOS users as well as the recent arbitration loss.
Case in Point
In a FINRA Arbitration Statement of Claim filed in June 2023, public customer Claimant Delmastro, representing himself pro se, alleged that "he attempted to make a trade on MSFT equity stock on Respondent’s thinkorswim trading platform, but for some reason, the transaction was
not completed as a stock transaction, but as an option transaction, and that this resulted in a significant loss for Claimant." In the Matter of the Arbitration Between Dennis S. Delmastro, Claimant, v. TD Ameritrade, Respondent (FINRA Arbitration Award 23-01749)
https://www.finra.org/sites/default/files/aao_documents/23-01749.pdf
In the Statement of Claim, Claimant requested $4,468 in damages but subsequently clarified that to $4,468.70.
Respondent TD Ameritrade, represented by counsel, generally denied the allegations.
Award
The sole FINRA Arbitrator found Respondent TD Ameritrade liable to and ordered it to pay to Claimant Delmastro $3,577 in compensatory damages and an $87.50 reimbursement of one-half of Claimant's filing fee.
Bill Singer's Comment
It is easy to make light of these pro se FINRA Arbitration cases, but that does a disservice to the many customers who feel wronged by larger FINRA member firms. We should always be mindful of the fact that FINRA has stacked the deck against public customers by forcing them to litigate their disputes in a forum that is run by a self-regulatory-organization that only enfranchises its member firms when it comes to electing its Board members and other elective offices. The public has no vote. The men and women who work at the member firms have no vote. FINRA Dispute Resolution Services is a hermetically sealed system owned and operated by the very industry against which public customers such as Delmastro are filing arbitration cases. As such, it becomes even more critical that FINRA arbitrators offer some explanation in their Awards as to why they ruled in the manner that they did and how they calculated the damages.
Given that an unrepresented public customer filed an arbitration claim against a represented FINRA member firm, the sole FINRA Arbitrator should have explained why he awarded only $3,577 versus the $4,468.70 requested. Indeed, there are many reasonable explanations for that lower value being awarded; however, not a single explanation or calculation is presented by the Arbitrator in support of his calculation.
Claimant Delmastro climbed into the ring without a lawyer, and he also was meticulous in clarifying that he sought an additional 70 cents in damages versus his original demand. Notwithstanding the customer's apparent passion, the Arbitration Award doesn't offer any explanation as to what Respondent TD Ameritrade was actually found liable for doing wrong. Pointedly, Claimant Delmastro alleged that the FINRA member firm's "thinkorswim trading platform" was somehow involved in altering a "trade on MSFT equity stock" into "an option transaction," and, as a result, Claimant suffered "a significant loss." Were some, most, all, or none of Claimant's allegations true? What caused some $3,577 in compensatory damages that the Arbitrator awarded to Claimant?
The FINRA Arbitration Award informs us that the sole Arbitrator found Respondent TD Ameritrade liable. Given that finding of liability, we may reasonably infer that the member firm did something wrong and, conversely, that the public customer's allegations of wrongdoing were justified. Given that takeaway, why the hell is Claimant Delmastro being forced to eat $87.50 (one-half of his $175 FINRA filing fee)? Seems to me that, at a minimum, the Award should have ordered Respondent TD Ameritrade to fully reimburse Claimant Delmastro for the $175 filing fee that he paid in order to file his claim.
Ultimately, one has to wonder as to the lack of commonsense at TDA that would have allowed this customer complaint to devolve into a FINRA Arbitration. Given the arbitrator's finding of liability, it seems a fair inference to draw that something went wrong with the TOS platform. It seems puzzling that TDA allowed a few thousand dollars of customer dissatisfaction to go unremediated and wind up as a very public, published FINRA Arbitration Award.
There are many online examples of customers who are dissatisfied and/or complaining about TOS, e.g. "Thinkorswim Reviews (2023)" https://topratedfirms.com/brokers/customer/thinkorswim-review.aspx, which gives the TOS product three out of five stars. As evident in the online reviews, TOS has its ardent proponents but there are also traders who raise questions about the reliability of entered trades getting executed on time or at all.
Earlier this month,Schwab issued "Schwab Introduces Schwab Trading Powered by Ameritrade, Setting a New Standard for the Retail Trading Experience / Combination of the thinkorswim and Schwab Trading Platforms, Extensive Trading Education and Specialized Service Brings Together the Best of Schwab and TD Ameritrade’s Trading Offers" (Schwab Press Release / 10/16/2023)
https://pressroom.aboutschwab.com/press-releases/press-release/2023/Schwab-Introduces-Schwab-Trading-Powered-by-Ameritrade-Setting-a-New-Standard-for-the-Retail-Trading-Experience/default.aspx
Schwab's October 2023 Schwab Press Release asserts in part that:
“When you’re backed by robust, innovative trading technology, it makes a difference – and that applies to both sophisticated traders as well as those who are just starting out,” said James Kostulias, Managing Director and Head of Trading Services at Charles Schwab. “Schwab Trading Powered by Ameritrade is much more than just the merging of great trading functionality that already existed at Schwab and TD Ameritrade. It’s a super-charged, holistic retail trading experience that surpasses its predecessors and makes Schwab the clear destination for trading.”
. . .
“We’ve achieved an important, highly anticipated milestone in the integration with the broad availability of thinkorswim,” said Kostulias. “Trading is a huge focus for us at Schwab and represents a critical part of our overall business as we go forward. Trading has accounted for approximately one-fifth of Schwab’s revenue over the past two years, and across Schwab and TD Ameritrade, average net new assets among Trader households are about six-and-a-half times higher than non-trader households. We are excited to be able to offer traders an innovative experience at Schwab that combines the full breadth of wealth management that Schwab offers alongside award-winning trading platforms, tailored education and the incredible support that is at the heart of TD Ameritrade’s legacy.”
How did TOS' "robust, innovative trading technology" alter an equity trade into an options trade?
What went wrong with the "super-charged, holistic retail trading experience" that produced several thousands of dollars in losses in customer Delmastro's account and, nonetheless, failed to motivate TDA to settle with the client rather than permit the dispute to go through a FINRA arbitration hearing and resultant Award?
In light of Delmastro, is Schwab still excited to be able to offer traders an innovative experience at Schwab that combines the full breadth of wealth management that Schwab offers alongside award-winning trading platforms, tailored education and the incredible support that is at the heart of TD Ameritrade’s legacy"?
Amid reports that Schwab intends to terminate its StreetSmart Edge trading platform in favor of TDA's TOS, it's likely that there are many Schwab day-traders who will be unsettled by such a transition and may well close their accounts and migrate to other platforms. Is Edge without detractors? Absolutely not. Is TOS a better product than Edge? Maybe yes and maybe no -- that will be decided by the number of Schwab traders who remain at the brokerage firm following the decommission of Edge. One question that I can answer is that TOS traders who encounter any operational issues with the platform may well cite to Schwab's enthusiastic prose in the firm's October 16, 2023, Press Release, and then to Delmastro -- and, who knows how many other FINRA Arbitration Awards may ensue involving more issues with TOS' platform. Hopefully Schwab will slow its roll before decommissioning Edge and will carefully consider the online complaints posted by unhappy TOS users.