Broker closing trades automatically

I’ve been trying to find a precedent for my situation all evening but still none the wiser.
I had several ‘sell’ positions open on a symbol which were all in the red. Due to a Market split, the stock was dropped in value by around %50 which would have been great for me, if my broker hadn’t closed my positons automatically. Does this sound unusual to anyone? Can anyone provide any rationale for why a broker would close a customer’s trades rather than just suspend the trading? I’ve read up a bit about market splits and I understand the intention of creating liquidity, but I could not find any examples of brokers making forced closures on trades.
Many thanks in advance, for any information.
I find it hard to believe its even legal…


You wprobably were overexposed and your margin requirements were too tight to sustain your positions.

Or in other words: you had not had enough money on your account to back the minimal margin requirements to sustain your positions.

Either add more money or have less positions/smaller positiins.

This is called a margin call

Hi there MrDE,
Thanks for the input

Actually, I still have a reasonable margin and I’m not trading with leverage, so I’m pretty sure this wasn’t the reason. They pointed out that they have to close all open positions on a stock before a ‘Corporate Event’, in this case a market split.

What I’m trying to figure out is what level of autonomy do I have over my own investments if the broker is able to simply step in and make automated closures due to a Market Split… I’ve read up about Market Splits and it seems there’s no reason for positions to be closed out and positions are simply adjusted to the new market value… totally stumped, and feeling a little ripped off. Like I say, I would be in profit right now if they had not taken this action.


You’d be in profit right now, but you didn’t call the trade right. The market cap of the company didn’t suddenly halve. It’s pretty ridiculous to think that a broker should have to pay you for this. Don’t forget about the poor guys on the other end of the trade, they’d be wiped out.

Anyway, it’d be completely open to abuse. A stock split doesn’t just happen, they give a notice and it’s in the public domain that it will happen. If you could easily double your money by placing a sell trade with a broker on a stock, then everybody would do it and the broker would instantly go bust.


Trading stocks and no leverage??? Welcome!!! Welcome!!! Welcome!!! LOL!!!

This happened to me years ago with CitiGroup. I just cannot for the life of me remember what happened. I will have to check (not sure if the history on that account goes that far back though).

But then again as I type this: I seem to remember that nothing happened other than that I was a bit surprised because I didn’t know what was going on. It did not result in my making any extra profit or loss i.e. all that happened was that the number of shares was increased to compensate for the stock split. My positions were not closed though that I do remember.

Here (but I will need to check to see if that history still exists I’m afraid i.e. the trade that was open on that day):

And the more I think about it now: I really do seem to remember that the position was closed by the broker and reopened at the new price but with the extra number of units.

Can you please share any screenshot on it? Is it available option to you?

Not sure who you are asking.

But if it’s me and re: CitiGroup. I checked (forgot to post about it).

Nothing happened. It doesn’t even show on a chart. The prices simply changed on the Y-Axis on the day. My positions were not closed either and the price was simply adjusted to reflect the new price. And neither were additional lots allocated. Simply put as noted: nothing happened.

Sorry, I’m two years into trading and still feel like a newb, correct me if I’m wrong but…

From what you’ve quoted above, you seem to be suggesting that we (traders) are in some kind of zero-sum game with our brokers, where if I win my broker loses… which does not make sense at all. If anything it suggests a major conflict of interest. Isn’t it the ‘market’ that absorbs my win or loss?? Not my broker…

Thanks for the feedback… I’m happy to know there are situations where brokers don’t take things entirely into their own hands.
I’m still a little confused by their action but it seems there are some comparisons out there… So a major loss and lesson for me…


1 Like

A lot of brokers have an exposure limit for margin. In fact quite a few will close all your positions at the 50% mark, some will go as far as 30%. Depends on the broker and leverage

There are actually a couple of types of broker account. You have B booking, and A booking. B Booking is usually where they charge no commission and have low spreads, but if you lose - the broker makes money. This is the most lucrative type of deal for brokers because 75% of traders lose money (up to 96% amongst newbies) and so all the losing newbies subsidise the losses when the winners win.

Then you have A booking - these usually charge a commission, spreads not so good. The broker passes you directly to the liquidity provider. So the broker doesn’t care if you win or lose as they make money on the spread and commission. The LP in turn assumes the risk or reward of you winning - pairing you up with other traders most commonly. This way your broker always makes money, but the rewards are smaller than B booking.

However in the case of boutique brokers they can’t really afford to manipulate the B booking clients as it is so obvious, and they get their liquidity from third parties anyway. Basically when you notice the manipulation, it’s very obvious anyway.

1 Like

Sorry for your loss. Still don’t think it should have cost you money though i.e. rather unfair of the broker.

Only good thing though: it’s a very rare event. Call it bad luck that you were trading that particular stock on that particular day. Not something you could have known about or anticipated let’s face it.

1 Like

Thanks for this! Very insightful.