Annual Disclosures

DriveWealth Institutional, LLC

 

Last updated: October 20, 2022

 

Our Mission is to provide the highest quality institutional execution experience with full transparency and the fullest commitment to satisfying our client’s sophisticated needs, while strictly adhering to the market’s exacting regulatory standards.

 

Riskless Principal, Principal and Net Trading

 

Orders routed to DriveWealth Institutional’ s Net Trading engine will be executed on a Net Trading basis. 

Orders routed to DriveWealth Institutional’s Principal facilitation engine will be executed either on a Riskless Principal, Principal, or agency basis.

The Firm offers net trading for its customers but only executes trades on a net basis pursuant to a customer agreement.  For transactions effected on a net trading basis, DriveWealth Institutional may buy or sell at a price that is different than the order’s not held limit price therefore DriveWealth Institutional will not charge explicit commissions or market center fees. Every execution to the customer is provided with a markup/markdown representing price improvement based on current NBBO at time of execution of the street side execution route.  

While transacting in a principal capacity DriveWealth Institutional may incur a profit or a loss. DriveWealth Institutional does not act as a market maker as defined under FINRA Rule 2124. DriveWealth Institutional follows all applicable rules surrounding net and principal trading, including but not limited to, FINRA trade reporting rules, FINRA Rules 2124 (Net Transactions with Customers), 2121 (Fair Prices and Commissions), 5310(Best Execution and Interpositioning) and 5320(Prohibition Against Trading Ahead of Customer Orders), and SEC Rule 611 under Regulation NMS (Order Protection Rule). Order routing practices, mark ups and mark downs, and clearing mechanisms are disclosed to and agreed upon with customers prior to the beginning of any trading relationship. 

All orders sent to DriveWealth Institutional’s Net Trading engine will be considered “not held” and treated as such. These orders will be handled using price and time discretion with the primary goal of achieving the best execution possible. These inbound orders will be reported to CAT on a “not held” basis regardless of what the customer’s OMS might default to in FIX routing.

In addition, orders sent to DriveWealth Institutional’s Net Trading engine must be marked as  “immediate or cancel” and will be treated as such. 

[1] https://www.finra.org/rules-guidance/rulebooks/finra-rules/2124

[2] https://www.finra.org/rules-guidance/rulebooks/finra-rules/2121

[3] https://www.finra.org/rules-guidance/guidance/reports/2018-report-exam-findings/best-execution-0

[4] https://www.finra.org/rules-guidance/rulebooks/finra-rules/5320

[5] https://www.sec.gov/spotlight/emsac/memo-rule-611-regulation-nms.pdf


Payment for Order flow

 

DriveWealth Institutional may enter into payment for order flow agreements or revenue share agreements with their customers.  In exchange for routing certain customer equity orders to exchanges, electronic communication networks, or broker-dealers during normal business hours, DriveWealth Institutional may receive monetary rebates. The amount rebated varies depending on the agreement reached with each market venue and will be furnished upon request.

 

Best Execution

 

DriveWealth Institutional will continuously seek the best price in the market, including but not limited to, all displayed and non-displayed interest. Due to the nature of fragmented markets and high frequency counterparties, the best price in non-displayed markets may not always be obtainable. 

DriveWealth Institutional reviews its execution venues effectively on a real time basis but no less than quarterly as guided by FINRA Rule 5310. DriveWealth Institutional considers a number of factors including but not limited to, the character of the market for the security, price, volatility, relative liquidity, size and type of transaction, number of markets, accessibility of quotation, and the terms and conditions of the order which result in the transaction, as communicated to DriveWealth Institutional and persons associated with DriveWealth Institutional.

Reg SHO

Customers of DriveWealth Institutional are responsible for ensuring that all sell orders sent to DriveWealth Institutional are properly marked as required by Rule 200 of Regulation SHO. Pursuant to Rule 203(b)(2)(i) of Regulation SHO, registered Broker Dealer subscribers are responsible for complying with the locate requirements of Rule 203(b)(1) of Regulation SHO. DriveWealth Institutional does not borrow or “locate” securities with respect to customer orders. By sending a short sale order to DriveWealth Institutional, the client is affirming its ability to borrow, or its ability to rely on an exception to Regulation SHO’s locate requirement.

 

Not Held Orders

 

All orders sent to DriveWealth are considered to be “Not Held” and will be marked and executed as such.

 

Extended Hours Trading

 

What is Extended Hours Trading?

The United States market is open between 9:30am ET (“Eastern Time” or local New York City time) and 4:00pm ET (“Core Trading Session”) Monday through Friday (excluding Exchange holidays). Extended Hours Trading refers to the periods of time that you are able to trade after the market closes and before the market officially opens. The rules for trading during Extended Hours Trading sessions may differ from the rules during the Core Trading Session. Extended Hours Trading may not be suitable for all investors.

You should consider the following points before engaging in Extended Hours Trading.

Extended Hours Trading Sessions

DriveWealth's Extended Hours Trading offering has two components: the Pre-Market Session and Post-Market Session (collectively, the “Extended Hours Trading Sessions”). You must designate a trade for Extended Hours Trading for it to be eligible for execution during these Sessions (according to the terms discussed below), and you do not need to designate a trade for either the Pre- or Post-Market Session specifically.

  • Pre-Market Session: The Pre-Market Session is from 4:00am ET to 9:30am ET. Orders will begin to queue for the Pre-Market Session starting after 8:00pm ET on the previous trading day, and will be eligible for execution (along with newly placed orders) during the Pre-Market Session. Any unexecuted or partially filled orders from the Pre-Market Session will automatically roll over into the Core Trading Session and, if still not fully executed, the Post-Market Session.

  • Post-Market Session: The Post-Market Session is from 4:00pm ET to 8:00pm ET, during which new orders may be entered. Additionally, any unexecuted or partially filled orders from the Core Trading Session will automatically roll over into the Post-Market Session. All unexecuted and partially filled orders will be cancelled at 8:00pm ET.

Extended Hours Trading Sessions will not take place on official Exchange holidays and DriveWealth reserves the right to change or modify hours of operation for Extended Hours Trading at any time without prior notice. A DriveWealth Extended Hours Trading Session, or any security traded therein, may be temporarily or permanently suspended without prior notice at any time at DriveWealth’s discretion.

How Does it Work?

DriveWealth may route trades to nationally recognized Exchanges, lit venues, market makers, and automated trading systems to facilitate Extended Hours Trading. Any trades designated for Extended Hours Trading will be available for execution during that trading day (4:00am ET through 8:00pm ET counting Core and Extended Hours Trading); any order placed outside of that time will be eligible for execution starting at 4:00am ET the next trading day. Once an order is placed, DriveWealth will attempt to execute it during the current Trading Session (or during the next Pre-Market Trading Session if the order is placed when trading is not occurring). A trade that is not fully executed during Pre-Market or Core Market Sessions will roll over to the next Session. If the trade is still not fully executed by the end of the Post-Market Session at 8:00pm ET, it will be cancelled.

Extended Hours Trading Sessions – Terms.

All trades designated for Extended Hours Trading will be subject to these Extended Hours Trading terms. 

  • Limit Orders Only. Only limit orders are accepted. The maximum individual trade size accepted by DriveWealth is 10,000 shares though this may be further limited by your Introducing Firm. 

  • Whole Shares Only. Only whole share orders are accepted. 

  • Eligible Securities. Not all securities may be available for Extended Hours Trading. The availability of a particular security may vary based on a number of factors, including the interest in that security during a given Extended Hours Trading Session. DriveWealth does not guarantee that Extended Hours Trading will be available in all securities or Exchanges.

  • Time in Force - Day. If you designate a trade for Extended Hours Trading, then the default time-in-force instruction is for one trading day. This means that if your order is unexecuted (or partially executed) at the end of one of the day’s trading sessions, your order will automatically roll over to the next trading session that same day; any unexecuted trades, or portions thereof, will automatically be cancelled at 8:00pm ET. For example: an order designated for Extended Hours Trading that is unexecuted (or partially executed) at the close of the Pre-Market Session will automatically roll over to the Core Trading Session; in addition, an order designated for Extended Hours Trading that is entered during the Core Trading Session and is unexecuted (or partially executed) at the close of the Core Trading Session will automatically roll over to the Post-Market Session (and if still unexecuted or partially executed at 8:00pm ET will be cancelled).

  • May Not Be Available for All Account Types. Extended Hours Trading may not be supported for all account types.

Important Considerations for Extended Hours Trading

Extended Hours Trading may not be suitable or appropriate for all investors and poses certain risks including, but not limited to: lower liquidity, price changes, news announcements, higher volatility, and wider spreads. DriveWealth does not guarantee that there will be a market for trades entered during or designated for Extended Hours Trading; there may be limited trading activity compared to the trading activity during Core Trading Sessions. This may make it more difficult to obtain order executions and may entail other risks such as those listed below:

  • Risk of Lower Liquidity. During Post-Market Trading sessions there may be less trading volume for certain stocks, making it more difficult to execute trades. In addition, there may be a number of orders ahead of yours that will be filled by incoming matching orders before your order can be filled. It is possible that your order will not be executed at all, or only partially executed. Unexecuted orders or portions thereof will be canceled at 8:00pm ET.

  • Risk of Higher Volatility & Wider Spreads. Stocks may experience greater price fluctuation and wider spreads during Extended Hours Trading than during Core Trading Sessions. News stories announced during the Post-Market Session may have greater impact on stock prices, as discussed in greater detail below. Prices may not be calculated or widely disseminated during Extended Hours Trading for certain securities products whose value is derived from an underlying index or calculated at other predetermined intervals. 

  • Risk of Changing Prices. The prices of securities traded in Extended Hours Trading may not reflect the prices either at the end of the Core Trading Session or upon the market opening the next trading day. As a result, you may receive an inferior price when engaging in Extended Hours Trading than you would during the Core Trading Session.

  • Not Reg-NMS Eligible. DriveWealth endeavors on a best-efforts basis to obtain the best available price in the market for trades executed during Extended Hours Trading Sessions.

  • Risk of Unlinked Markets. During the Core Trading Session, quotes and last-sales reports are consolidated. Extended Hours Trading quotes and last-sales reports are not consolidated across all Electronic Markets (“EM”). Extended Hours Trading quotes and prices will represent the best prices available at that time only through EMs that may be participating in Extended Hours Trading. Quotes and last-sale prices may vary widely from one EM to another.

  • Risk of News Announcements. Issuers often make news announcements that may affect the price of their securities after the Core Trading Session. Similarly, important financial information is frequently announced outside of the Core Trading Session. These announcements may occur during trading in Extended Hours Trading Sessions, and if combined with lower liquidity and higher volatility, may cause an exaggerated and unsustainable effect on the price of a security.

  • Competition. Many Post-Market-hours traders are professionals who are associated with large institutions and may have access to more information than individual investors.

Additional information about the risks associated with Extended Hours Trading is available from the SEC at: Post Market Trading: Understanding the Risks. 


LOW-PRICED STOCKS/ PENNY STOCKS

 

The terms “low-priced stock” or “penny stock” generally refer to symbols trading at a price below $5.00. They commonly are speculative securities of small low capitalization companies. These companies are also often referred to as micro-cap or nano-cap companies which are commonly quoted on the OTC Bulletin Board or in the Pink Sheets. However, low-priced stocks may also be listed and trade on other US Securities Exchanges such as the NYSE or NASDAQ as well as foreign securities exchanges.

  • Risks

Low-priced stocks can be extremely volatile, often characterized by market movements which can severely impact the price of the security. Investor trading activity, social media posts, and corporate announcements can significantly affect symbol price which may consequently affect an investor’s ability to liquidate positions causing principal loss and or additional fees. Investing and trading in low priced stocks is highly speculative and involves significant risk leading to a potential loss of investment.

Establishing the value of micro-cap and nano-cap companies may be difficult to assess due to the lack of available information about the issuer, their prospects or the risks associated with their business. While many issuers register their securities with the Securities and Exchange Commission (“SEC”) and provide reporting information, certain issuers of low-priced securities have no obligation to provide reporting information to investors.  Certain company’s securities may continue to be traded even when issuers have not met their reporting obligation to the SEC or other federal or state regulatory agencies.

  • Additional Fees

Investors in low-priced securities can incur significant fees.  Certain low-priced securities are not eligible for Depository Trust & Clearing Corporation (“DTCC”) clearing or may have their eligibility revoked resulting in significant clearing fees which may be charged back to the client including but not limited to execution fees, DTCC fees, deposit fees, and transfer agent fees.  These fees can significantly exceed the total value of the original trade. DriveWealth may not be immediately notified by its clearing agents or vendors about additional fees therefore may charge the client account these fees weeks after the relevant trade occurred. DriveWealth reserves the right to withhold funds in a client’s account until full assessment of fees surrounding the client’s trading in low-priced securities is complete. The client is ultimately responsible for verifying the eligibility status of a low-priced security before trading it.

It is important to note penny stocks have not been approved or disapproved by the SEC. The SEC does not make determinations regarding the fairness or accuracy of the prospectus or information provided by an issuer or a broker/dealer of penny stocks. Investors are at their own risk.

For additional information please see:

SEC Microcap Stock: A Guide for Investors: https://www.sec.gov/reportspubs/investor-publications/investorpubsmicrocapstockhtm.html

FINRA Notice 92-42: https://www.finra.org/rules-guidance/notices/92-42

EXCHANGE TRADED FUNDS/EXCHANGE TRADED NOTES

 

Investors should thoroughly understand the objectives, risks, and fees associated with exchange traded funds (“ETFs”) and exchange traded noted (“ETNs”) prior to investing. U.S. listed ETFs and ETNs generally file a registration statement and prospectus with the SEC.  Investors should obtain and carefully read the prospectus, registration statement as well as other documents the issuer filed with the SEC or other regulatory body. These documents may be obtained by visiting EDGAR on the SEC website at www.sec.gov.

It is important to note ETFs/ETNs have not been approved or disapproved by the SEC. The SEC does not make determinations regarding the valuation, fairness or accuracy of the prospectus or information provided by an issuer, authorized agent or broker/dealer of ETFs/ETNs. Investors are at their own risk.

  • Risks

ETFs/ETNs can trade at a discount or premium to the net asset value. Depending upon market conditions, investor activity and the objectives of the ETF/ETN the publicly traded price of an ETF/ETN can fluctuate and may be very different from its redeemable or net asset value thereby impacting investment value. Leveraged and inverse ETFs have unique risks, including leverage, derivatives, complex investment strategies and compounding risk which create even greater impact on the underlying net asset value of the ETF/ETN and market price volatility. Leveraged and inverse ETFs are highly speculative and involve significant risk leading to a potential loss of investment.

Certain ETFs and ETNs may be redeemable via an authorized agent. DriveWealth does not create or redeem ETF/ETN shares nor does it engage an authorized agent to do so. Investors seeking to redeem ETF/ETN shares may incur significant fees or may be limited to receiving “payment in kind”.

For additional information please see:

SEC’s Alert on Leveraged and Inverse ETFs at https://www.sec.gov/investor/pubs/leveragedetfs-alert.htm

 

Please be advised, DriveWealth reserves the right to restrict or otherwise discontinue trading in any security, including Low-Priced/Penny Stocks and ETFs/ETNs, at any time without prior notice.