Friday, August 14, 2009

Time To Move Your Account Out of E-Trade

The Citadel hedge fund group is in the process of dumping their stock in E-Trade. About two years ago they bought a majority stake in the ailing company in order to "vulturize" E-Trade's distressed home equity loan assets. Well, now Citadel is dumping its equity stake:

"The Chicago-based alternative investments giant is slashing its stake in E*Trade by more than two-thirds, it said in a Securities and Exchange Commission filing. Citadel, E*Trade’s largest shareholder with a 14.9% stake, plans to sell shares under an insider stock-trading plan, putting some on the block every day until the end of October"

Adios E-Trade

It might not bother you that your stock portfolio is in the custody of a dying patient losing its healthcare, but then I found this gem at

"Citadel is getting ever more intertwined with the online broker's operations, in fact giving the Chicago firm almost exclusive control over E-Trade's customer trade flow"

I Would Get My Account Out of E-Trade A.S.A.P.

In other words, Citadel is in a position to make a lot of money off of your stock trades at E-Trade, either front-running your orders or providing your order with inferior trade execution - and in a manner which allows Citadel to make a small "skim" off of your order flow.

The moral of the story is that you are better off moving your brokerage/IRA account to well-capitalized firm with a good balance sheet, like Fidelity or Schwab.


  1. Nice catch, I would agree that E-Trade may not be the way to go after this.

    Im off on vacation for next week. I look forward to getting caught up whwn I return. Great site.

  2. thanks for the feedback gyc. have a great vacation.