Illiquid Market Surcharge Penny stock traders

Illiquid Market Surcharge

Penny stock traders are susceptible to a illiquid-market surcharge related to the clearing cost of certain thinly-traded stocks. The Illiquid Market surcharge is due to the capital costs required to clear trades of certain penny stocks. When the aggregate share volume of all trades performed by a trader in that stock, over a three-day period of time, exceeds 25% of the average daily volume of the stock, the charge may apply.

Whenever a trader sells a stock, priced at less than $1.00 per share, where the trade volume exceeds 25% of the average trade volume for that stock (based on a 30-day average) the clearing firm is accessed a “Illiquid Market Charge”. This charge is in the form of a capital requirement to cover financial exposure during the stock’s settlement period. The interest on the capital requirement can be as high as 100 times the trade value, or more. This interest charge will be passed on to the customer.

In addition to assessing an illiquid-market fee, the clearing firm also may also have to bust the trade – which means that the trade will not clear and the seller will be reassigned the shares and continue to hold the position. After this happens, the seller will be warned that the trade violated the illiquid-market rule. This is effectively a “strike” against the trader. If there is a second offense, the account will be placed on a 90-day hold. There is also the possibility that the account may be permanently closed.

(Posted by Mikey)

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Non-DTCC Eligible Search Utility (posted by MaxShockeR)


For various reasons, certain securities cannot be made DTCC-eligible or have had their eligibility revoked, usually due to operating or financial issues with the underlying company.

Search DTCC & Non-DTCC Eligible Stocks here

As a result, the clearing of these positions can carry significant pass-through charges to settle the trade. Trades in these securities may carry with them some or all of the following pass-through charges: Execution Fee-$7.50, DTC Fee-$80.00, Deposit Fee-$75.00, and a New York Window Fee of $34.00. Additional pass-through fees from Transfer Agents ranging from $25.00 to $500.00 can also be associated with these securities.

These fees are almost exclusively associated with OTC Bulletin Board and Pink Sheet stocks, and should not appear on settlement for any Listed or Nasdaq trades. These fees are initiated by the Depository Trust & Clearing Corporation (http://www.dtcc.com/), as well as various transfer agents, and are applied industry wide.