Trading Disclosure

 

Last Updated: October 29, 2024

 

DriveWealth, LLC (“DriveWealth”) acts as the clearing firm for your advisor or broker (“Introducing Firm”). As part of our services to your Introducing Firm, we facilitate trading in certain U.S. securities for your account. All trading carries risk, including the potential loss of your entire investment, and past performance is no indication or guarantee of future results. Fractional Trading (defined below) has unique risks and has certain limitations; Fractional Shares (defined below) may also have different rights from full share interests in the same security. You should review and understand these risks and limitations before engaging in Fractional Trading.

The following describe DriveWealth’s system capabilities in facilitating trading for your Introducing Firm. The following items are subject to change and may be further qualified based on the terms and conditions, and products offered by your Introducing Firm.

Order Entry

DriveWealth facilitates trading for your Introducing Firm and your account, which may include both share-based orders, which specify a certain number of shares of a particular stock or security, and notional-based orders, which specify a monetary value rather than a specific number of shares. Either type of order may result in fractional share quantities rather than whole numbers. Fractional trading encompasses all trades involving non-integer quantities (“Fractional Trading”) Fractional Trading allows you to trade and hold fractional share quantities of less than one full share (e.g. 0.45 shares) in your account (“Fractional Shares”).

Your ability to submit a share-based order, or a notional based order is determined by your arrangement with your Introducing Firm.

Fractional Trading is generally available for those exchange-listed National Market System (“NMS”) securities offered via DriveWealth; however, securities available for Fractional Trading are subject to change without notice in DriveWealth’s sole discretion. If a security is no longer eligible for Fractional Trading, then your existing Fractional Shares may be subject to liquidation only, meaning that you cannot accumulate more Fractional Shares in the particular security, but you will be able to divest your Fractional Share interests in that security.

Security positions held in custody in your account are reflected on DriveWealth’s books and records to eight decimal places.

Order Types

DriveWealth supports the following types of orders:

  • A market order is an order to buy or sell a security as quickly as possible at the current market price but does not guarantee the execution price. It is important for investors to remember that the last-traded price is not necessarily the price at which a market order will be executed. In fast-moving markets, the price at which a market order will execute often deviates from the last-traded price.

  • A market-if-touched (MIT) order is a conditional order that becomes a market order when the security reaches the specified trigger price in the market.

  • A limit order is an order to buy or sell a security at a specific price or better. A limit order can only be filled if the stock's market price reaches the limit price. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. A limit order runs the potential risk of no fill or partial fills based on the prevailing market conditions and the liquidity available at the specified limit price.

  • A stop order, also referred to as a stop-loss order, is an order to buy or sell a stock once a specified price, known as the stop price, is reached. When the stop price is reached, a stop order becomes a market order that will be executed at a specified price (or better). A stop order runs the potential risk of no fill or partial fills based on the prevailing market conditions.

More information about order types is available at: https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_ordertypes.

DriveWealth supports Fractional Trading in market, stop, and MIT orders. DriveWealth supports Fractional Trading Limit orders only during the core trading session. Market orders placed during the pre-market session or post-market session will be subject to Market Order Collaring, as described in DriveWealth's Extended Hours Trading Disclosure.

Orders placed may have Time-in-Force instructions for DAY or Good-til-Cancelled (“GTC”). Time-in-force is a special instruction used when placing a trade to indicate how long an order will remain active before it is executed or expires – trade instructions sent by your Introducing Firm to DriveWealth have a Time-in-Force instruction for DAY (a single trading day) or good until cancelled.

GTC orders will be retained for the next regular market trading session if not cancelled and will remain open for up to 90 calendar days until they are filled completely or cancelled by you or DriveWealth. Absent receipt of contrary instructions, DriveWealth may modify or reduce the price of open GTC or DAY limit orders in the event of certain corporate actions or dividend payments. DriveWealth, however, may opt to cancel any order in connection with certain corporate actions or dividend payments that may require an order adjustment in accordance with applicable regulations. DriveWealth reserves the right to not adjust orders that may be subject to a corporate action adjustment and may instead cancel the orders prior to the time the adjustment is required.

Unless eligible for extended market trading sessions, market orders received after the close of the previous regular trading session will be retained for execution in the next regular trading session if not cancelled.

If you place an order to buy or sell a specific number of shares, DriveWealth will fulfill your order by multiplying the number of shares by the price at the time your order is executed and rounding the dollar amount to two decimal places.

If you place an order to buy or sell a specific dollar amount (i,e., a notional order), DriveWealth will purchase or sell up to the amount requested.  Please note that the  final dollar value of your order may be slightly different than your original requested amount due to a variety of potential factors including, but not limited to, price movements, how certain orders may be filled in the market or internally, fees that are assessed on trading, rounding adjustments, and taxes that are applied.  The actual value will not exceed the total buying power available or the notional value of the order you placed.

In certain cases, your trade confirmations may reflect either a "fee" or a "credit" that includes a rounding adjustment. This is done to reconcile calculation differences between pricing expressed with more than two decimal places and standard two-decimal-place pricing. These rounding adjustments will be reflected as additions or deductions from the execution amount in your account statement but you will in all instances receive the full principal value of your notional order.

Orders received in good form by DriveWealth will be accepted and routed to regulated broker-dealers for execution. Cancellation of a market order is not guaranteed. If the order has been released for execution you may not be able to cancel your order. Similarly, there is no ability to request that an order be “cancelled and replaced” (meaning, you cannot modify an order once it has been submitted). Instead, you will need to cancel your order outright and then submit a new one.

During periods of heavy trading and/or wide price fluctuations, there may be delays in executing your order and Fractional Trading may not be available. If you place a market order in volatile market conditions, there could be a significant difference between the quote you received prior to or at the time you placed the order and the execution price that you receive.

If a security experiences a trading halt, all trading, including Fractional Trading, that has not yet begun executing, will be paused, and your order will be held until trading resumes. If your order has begun executing, and the fractional portion of your share has not yet filled, the fractional portion of your trade will be cancelled and not be executed. If you submitted an order with a time-in-force instruction for DAY, and trading does not resume or your order is not able to be executed, then your order will be cancelled (including any Fractional Trading), and you will need to resubmit your order the following trading day.Trade Capacity

DriveWealth may act in an agency, principal, or mixed capacity basis, when executing a trade depending on the nature of the order, and whether your order contains any Fractional Shares.

DriveWealth, or one of its executing brokers, will execute the whole share component of a trade on an “Agency Basis.” When executing on an Agency Basis, DriveWealth’s executing brokers may execute or route your order to a market venue for execution.

DriveWealth will execute the Fractional Share component of a trade on a “Principal Basis.” When executing on a Principal Basis, DriveWealth will execute the fractional component of the order against its principal facilitation account. Any fractional share interest in the whole share not allocated to your account may be allocated to other customers or retained by DriveWealth as principal.

DriveWealth will execute a trade which includes both a full share and Fractional share component (e.g. 1.4 shares) on a “Mixed Capacity” basis. When executing on a Mixed Capacity basis, the full share component of the order is executed on an Agency Basis and the Fractional Share component of the order is executed on a Principal basis. When executing on a Mixed Capacity basis, the Fractional Share component of the trade will receive the same price as the full share component.

 

Trade Execution

 

All trading, including Fractional Trading, is executed by DriveWealth on a best-efforts basis only. DriveWealth does not guarantee that there will be a market for a particular security and makes no representations or warranties about its ability or willingness to facilitate trading in Fractional Shares, or the execution timing of an order.

All orders, including those for Fractional Trading, are marked “Not Held,” which gives DriveWealth and/or its agents the time and price discretion to execute the order without being held to the security’s current quote. Each time you submit an order to buy or sell a security, you and your Introducing Firm authorize DriveWealth or its agents to “work the order.”

For orders that are executed on an Agency Basis, DriveWealth regularly reviews such orders for quality of execution. Additionally, DriveWealth will endeavor on a best-efforts basis to execute Fractional Shares at the National Best Bid or Offer (“NBBO”) at the time of execution. Please note that the price your order is executed at may be higher or lower than the price you are shown at the time you place your order. Fractional Shares may not be eligible for “Price Improvement.” Price Improvement occurs when an order is executed at a price more favorable than the NBBO. Price Improvement will operate differently, and in some situations less advantageously, in connection with Fractional Trading from the way it would if you were trading in whole share quantities. Additionally, because in certain situations Price Improvement on the fractional share component of an order will affect the execution price rather than the share quantity of an order, the effect of the improvement on a dollar-value order in those situations will be to increase or decrease the value of the order outside of what was requested.

Orders placed prior to market open may not be executed directly at the open and orders placed close in timing to the close of the market will not be guaranteed to be processed that same day; if your order has not processed and has a time-in-force of DAY or was cancelled, you will need to replace your order the following trading day. DriveWealth may wait for the primary exchange to open before commencing trading in a particular security, and the availability of trading and Fractional Trading in a particular security may depend on prevailing market conditions. DriveWealth offers extended hours trading for which different rules may apply; please refer to the Extended Hours Trading Disclosure for more information. When trading as principal for its own account, DriveWealth may make a profit or incur a loss on each trade. DriveWealth may periodically be required to correct or adjust trades that (for a variety of reasons) have been executed in amounts that either exceed or fall short of the amounts requested. These trade corrections and adjustments could arise in connection with either or both of the agency and principal components of the executed orders. Trade corrections and adjustments will be executed by DriveWealth in a principal capacity, and when trading as principal for its own account, DriveWealth may make a profit or incur a loss.

 

Shareholder Rights

 

Fractional Shares may have different rights from full share interests of the same security. You should be aware of the following as it relates to Shareholder Rights:

  • Transfer of Fractional Shares. Fractional Share positions may not be able to be transferred or certificated. The Automated Customer Account Transfer System (ACATS) does not support Fractional Shares. If you want to transfer your account or specific Fractional Share positions to another broker, you may be required to sell the Fractional Share position(s) and transfer the cash proceeds.

  • Voting. DriveWealth facilitates the extension of voting rights to Fractional Shares. When you vote your interest in a Fractional Share, your fractional position vote will be added to the aggregate vote total for all shares of such security reported on behalf of DriveWealth to the applicable vote tabulator (“Tabulator”) for the meeting or shareholder event. A Tabulator is an independent third-party service provider selected to provide vote tabulation services for an issuer’s shareholder meeting or similar shareholder event. Neither DriveWealth nor any third-party vendors are affiliated with any Tabulators. Each Tabulator may follow differing policies for counting fractional share positions submitted to it for a meeting or shareholder event, and it is therefore possible that a Tabulator may discard fractional positions submitted to it on DriveWealth’s behalf or follow rounding practices, such as rounding down to the nearest whole share, that have the effect of excluding some fractional positions submitted to them from the total number of shares voted. Note that issuers may also not report fractional shares voted at their meeting or shareholder event in the vote totals reported on their current report on Form 8-K or otherwise.

  • Dividends. If your Fractional Share pays a dividend, the dividend payable to your Fractional Share position must be greater than or equal to $0.01 in order to be credited to your account. DriveWealth does not offer a dividend reinvestment program, and any proportionate dividends received will require you to place an order to invest those funds.

  • Corporate Actions. Fractional Shares may be eligible to participate in mandatory corporate actions such as stock splits, mergers, or spin-offs. Where available, DriveWealth will distribute interests in proportion to ownership interest, inclusive of Fractional Shares. Because of the unpredictable nature of corporate actions, there may be situations that arise that are not described herein. Generally, these situations will be handled in accordance with the concepts applicable to dividends and reorganizations. Interests will be divided and distributed where possible in proportion to your ownership interest. The foregoing notwithstanding, these situations are in all cases subject to the terms contained in the materials prepared by the issuer describing the corporate action, as well as DriveWealth’s applicable policies and procedures, which may result in a different outcome from what is described above.

  • Cash-in-Lieu. If you receive Fractional Shares as the result of a corporate action, DriveWealth may, in its sole discretion, sell such Fractional Shares on the open market or to the issuer or transfer agent and distribute the pro-rata proceeds to your account. If sold on the open market, the sale price may differ from that offered to certain registered owners by the issuer or transfer agent.

 

Undistributable Interests

 

All Trading and certain items related to Fractional Share ownership including, but not limited to, those stated above in Shareholder Rights, may be subject to Undistributable Interests. DriveWealth will only support payments that are equal to or greater than $0.01 per share. Amounts smaller than $0.01, or other nondivisible amounts, will not be distributed. Instead, it is generally but not always the case, that when the aggregate value to be distributed is less than or equal to $1.00, it will be retained by DriveWealth, and when it exceeds $1.00, it will be escheated.

 

Tax Treatment

 

DriveWealth and you agree to treat you as the owner of all Fractional Share interests allocated to your account, to file all tax returns in accordance with such treatment, and to take no action inconsistent with such treatment.

 

Additional Considerations

 

If your account is closed, then Fractional Shares held in your account may be liquidated and the proceeds distributed to you as cash.

If your account has been approved for margin, notwithstanding the terms of the Customer Agreement, DriveWealth will not lend (hypothecate) your Fractional Shares.

DriveWealth, its affiliates, vendors, licensors and agents may collect anonymous, statistical data about your trading activity, including information gained through the use of tags and other means. You agree that we may use this data for purposes of improving our services, and for our other business purposes.