Test driving Zecco.com, part 2
Posted by ML on December 27th, 2006
Gathering from your questions after the first part of this review, there is a lot of interest in Zecco.com and their promise of zero commission trades. In the concluding portion of this review, I’ll describe my impressions about their order execution, answer some reader questions, as well as relay some difficulties I’ve been having.
Order execution
First of all, Zecco is true to the name. Both buy and sell orders, market or limit, are free. You do have to pay the usual SEC fees upon selling. At $30.70 per million it shouldn’t break anyone’s bank.
Zecco claims the industry standard of 30 seconds for order handling. It doesn’t offer level II quotes but through another online broker I was able to see my limit orders routed through the Pacific Stock Exchange (PACX) only seconds after they were entered. On one occasion, I modified an existing limit order and it took over a minute to appear. It’s probably faster to cancel existing orders and enter new ones rather than using the “modify” function if such things matter to you.
Zecco also offers stop market and stop limit orders, but not conditional orders. I give their order execution a 4.5/5.
Reader questions
TJP asked if they offer dividend reinvestment. My original answer was “no” which was incorrect. From their FAQ,
Does Zecco Trading allow account holders to automatically reinvest dividends for equities and exchange traded funds?
Yes, dividend reinvestment is a feature that is available to our clients and can be setup during the account opening process. If you would like to add this feature after the account opening process is complete, you must submit the request in writing to our customer service department.
However, you can’t buy fractional shares at this moment.
Taz asked if there is a fee associated with ACH transfer. The answer is no, but it may take up to three days for the money to go through. Taz also asked a question regarding the $2500 minimum account balance to get zero commissions. The account balance is defined as the sum of the market value of all the securities and the free cash balance. The minimum applies to the account balance, not the free cash balance, so it doesn’t keep the $2500 tied up.
Trouble with my account
I’ve received reader comments about how thrilled they are with Zecco. Not surprising given what I’ve said so far. However, I have been experiencing some serious problems in my account personally.
This is what happened. I opened the account primarily to test a momentum trading model with holding period of several days on average. Naturally, the promise of zero commission was extremely attractive. My first trade involved 50% of the capital and lasted 5 days with a 1.4% profit. Everything went smoothly and I was able to use the full amount right after exiting that position (customary in a margin account). My second trade deployed close to 100% of the capital which I exited 2-3 days later at an average profit of 1%. However, I noticed that my cash was locked up for 3 days (customary in a cash account). To my horror, I also noticed that my balance became much less than what it should have been.
For some reason my account was deemed “subject to IRS backup withholding” of 28%. The punch line was that it was 28% of sales, not of profits. So after two profitable trades that turned over nearly 150% of my capital, my account is down 150% x 28% ~ 40% from what it should be.
Apparently, this was caused by some missing paper work. It happed frequently enough that Zecco actually has a page about this, titled, no joke, “Where is my money?” There is also an active thread in their forum about this.
Here are my gripes,
- I followed the instructions after the on-line application and mailed in the signed W-9 form. My missing form (not required for all applicants) was not mentioned in those instructions. I found out about the missing form after the withholding had already taken place by calling customer service. As a matter of fact, the customer service rep promised that someone would contact me regarding the form, but no one did and I got the form myself from their website.
- My biggest gripe was that nowhere on the website was there any record of the withholding. It was as if the money simply evaporated. If you follow the forum link above, you will find the issue was first raised at the end of October. The president of Zecco actually responded to that thread so I’m sure management is aware of this. Elsewhere on their website they say they are working with Penson, their clearing firm, to resolve that issue. At any rate, they have known the problem for at least 6 weeks and nothing has been done. This is unforgivable because I can’t imagine a more pressing concern than proper accounting of the customers’ money.
- I faxed as well as mailed in the hard copies of the required forms last Tuesday. On Thursday there was a power outage in the middle of my call with a service rep. On Friday, I was finally able to confirm that all the needed paper work would be in place after the hard copy arrives.
- Through out this ordeal, my emails were never answered. It was quite tricky to reach a live operator, although I’m getting good at it.
- On more than one occasion, the customer service rep had to put me on hold for several minutes while looking up my file which makes me question their information organization system.
The other problem I had with money market sweep was probably related. Currently, I’m earning only 1% on the free cash balance. One person from Zecco’s marketing department contacted me to offer help after reading my remarks in the comment section of the previous post. I declined since I wanted to have the perspective of a typical customer.
They did say on their website that if they don’t receive the proper paper work within 30 days, Penson will forward the withholding to IRS. For now, I can only hope that I get money back soon.
Conclusion
One reason I waited so long to finish my review was that I was simply livid about the missing funds. As they say, you shouldn’t go food shopping while hungry… Bad analogy but you get the picture. Had I written this a week ago the tone would have been very much different.
I decided to try Zecco in the first place because of their “anti-establishment” feel, and I still want them to succeed. But I have to face up to how unpolished they are now. So I’ll make the following limited recommendations. I think Zecco is good for:
- Experienced online investors who use Zecco as an alternative account. This is somebody who knows exactly what she wants and who sets up everything right in one shot.
- Novice investors who care a great deal about trading cost and who is content with the basic buy and sell operations.
If you do decide to open up an account at Zecco, do learn from my experience: send in all your forms!
More related posts:
Digg it Del.icio.us Reddit Furl BlinkList Newsvine Yahoo MyWeb
December 27th, 2006 at 6:49 pm
Thanks for posting that review. I was about to test try them with a sizable account and post a review about my experience but I think I’ll pass and postpone. I might do it six months from now to see if there has been any improvement in their service. I would have been extremely PO’d if I had opened a large account then had 28% of my money disappear for tax withholding!
December 28th, 2006 at 7:05 am
What’s amazing is that their system is setup to withhold the sales and not the profits. That’s just a big blunder on their part. I agree with Rich, I think I will wait and see what happens. Withholding 28% of your sales is not IRS withholding it’s call STEALING! That is a SERIOUS problem and I cannot believe the problem is not fixed.
Thanks for your notifying me of the problem. If it had not of been XMAS I probably would of already of sent in my forms.
December 28th, 2006 at 10:50 am
I will wait six months or so as well until they iron out this bug. I don’t like paying commissions, particularly for more than 1,000 shares. Who do you use for level II quotes? My current broker doesn’t offer them and I am quickly realizing that I need something other than a generic brokerage used by the mainstream if I am to quickly accumulate wealth.
December 29th, 2006 at 7:12 am
Kelly and others,
I get Level II from TDAmeritrade as part of the Apex package. It’s my main trading account.
I’ll let you guys know when I get my money back. I’m not seriously considering checking out the no-commission offer from Bank of America.
Happy New Year!
January 15th, 2007 at 11:02 am
This was a very helpful post. I agree that it is absurd that Zecco has not delt witht he missing account issue for more than six weeks. If nothing else, it should take no more than a few minutes to direct people to the withholding forms. I am a little disapointed in your review, howeer, that you did not elaborate on the problem with the money market sweeps. One reason that I am looking for a new broker over my present oe (Scottrade) is because I am getting way below the market rates on free cash. At Zecco, if I got a money market sweep I would be earning more than at Scottrade, but at 1%, I would be earnig even less at Zecco.
January 16th, 2007 at 12:47 pm
NS,
This was part of the difficulty I was experiencing. On the application you are able to select one of three money market accounts for daily sweep. I think they use Scudder and the rate is in the 4% range. This is not something you can select from the web site. You would have to call in to make changes. It’s also hard to find the current rate without calling in.
They finally straighten out my paperwork which was when my money market sweep was activated. This was the end of December. However, Penson (Zecco’s clearing firm) has already forwarded my withholding to the IRS which means I’ll lose several hundred dollars in interest alone even if I get it back when I file my taxes. The amount of withholding was eventually shown on the December statement that wasn’t available until the first week of January.
I have ceased all trading and transferred all my money out of my Zecco account.
January 26th, 2007 at 3:55 pm
thanks for your input, you have been very helpful.
I signed up for their forum, just to give it a test ride. However, I didn’t write down the password because I was just giving it a try. I forgot my password because I never wrote it down because I never thought it would be important. I later tried to open up an account but could not because the password for the account and the forum had to be the same because they wouldn’t have two passwords from the same email address. I tried to get them to send me my password to the email address they have on file, but they never did. Consequently, I have never opened up an account. I think I am going to try “Just to Trade” instead, who has stock commissions at $2.50 per trade. MBtradeing also has cheap stock commission, $0.01 cent per share with no minimum, which comes to $1.00 per trade for a round lot of 100 shares. However, MBTradig is a direct access broker, and I am not sure that I am ready for the direct access trading platform yet because it is too easy to make a mistaken order and not know it. Obviously, the type of guy who forgets his password is going to be prone to dumb mistakes like adding an extra zero to the number of shares in a trade.
January 26th, 2007 at 7:04 pm
Hi ML,
I work at Zecco and would like to thank you for the very thorough, thoughtful and helpful review of our site. Feedback like this is invaluable to us as we are working very hard to quickly improve our customers’ signup and trading experience.
In response to feedback from you and other customers, we are now proactively calling new customers to ensure all paperwork is in order, and taking actions to ensure phone calls are answered quickly by knowledgeable service associates and that emails are responded to within 24 hours.
Thanks again for your feedback and hope we you share our enthusiasm as we build a world class free trading service and online community. As a heads up to your readers, we’ll be launching IRAs and complex options functionality in the coming weeks.
Best regards,
Gabriel
February 25th, 2007 at 8:47 pm
This company sends the login and the password in plain text after the registration!
They are crazy!
March 2nd, 2007 at 11:58 pm
Hey Pals,
If u would’ve notice… this is my second post. I posted some queries earlier prior to opening my account at Zecco.. Yes I do agree with bloggers here about problem occuring into amount getting unavailable etc. but things are fine after they(zecco) have received all the paperwork.. which takes a while to figure out, usually 2 weeks…
So I would definitely recommend Zecco for rookie traders and non-daytraders… Some key points noteworthy… rather fine details
1. ACH transfer normally takes 2 days for money to get into the account.
2. Margin acct is preferable over Cash.. since it updates your buying power in real time.. and doesn’t charge you until you borrow any money.
3. Zecco places decimal precision upto 3 i.e. in placing an order for price $11.305 becomes $11.31 (EXAMPLE).. This would not be much of significance for non-penny stocks but play a big role in stocks of value less than $0.001 … (surprised ?? yeah investors do trade in these shares too.. if not aware of..)
So this forces to ‘call in’ to execute such a trade.
These are some of my experiences or encounters so far.. yet to discover many.. and would request others to respond with their experiences. Also, plz tell us all what other competitors have in respect of fine details.
Taz
March 22nd, 2007 at 10:00 am
Zecco trading: Stay away from them. Filled out application online, mailed paper work, funded the account more than 2 weeks ago still not able to trade. Status shows pending approval. I was able to apply and trade same day from other online traders. I guess they are not kidding when they say they are able to make money using your account balances. Obviously bcoz they do not let u use ur money for so long. When called they said waiting for processors approval, whatever that means. Tried to withdraw funds 4 days later ach still showing pending processors approval. Bottom line Zecco bad news.
May 7th, 2007 at 4:11 pm
Hello,
I’m a user at Zecco.com as well, and I recently found this website. I’ve had my account there for about 3 months and I have to warn you that if you do not have well over the 25000 for day trader your margin will vary daily. I’ve had a lot of problems with my account balance and I’ve had quite a few day trader calls that they have admitted to causing and reversed on my account. They keep telling me that if I had more the 25k it wouldn’t be a problem, but after they lost 1/3 of my money within a week, and then repeatedly issued day trader calls to my account, I’m not going to give them any more money. Also, they have problems with “0 buying power” so you can’t trade for the entire day…or days until you call first thing in the morning to straighten it out.
I’m one more day of “0 buying power” of going back to e-trade. Although, I have become very acquainted with a few of the Zecco staffers, and they are all nice and understanding about their computer problems, but I don’t know that I want to stick around until they iron out all their problems or if I’ll go somewhere where I can actually make some money.
Good luck to everyone!!
Jen.
May 29th, 2007 at 10:35 am
Hi, I’m new to trading and signed up with Zecco about a week ago and there are a couple things that I don’t quite understand even after reading their FAQs and the posts on this website.
Let’s say that I open a cash balance account worth $5000 (paid for with a personal check) and I have used the complete balance to purchase stock and now I have decided to sell. For simplicity, assume I sell the stock on a Monday and make a profit of 2%. Now since this is a cash balance account, my buying power will be $0 till Thursday (T+3 days to settle) and I won’t be able to purchase any stock until Thursday, correct? On Thursday, my buying power will be $5100, correct?
Now the same scenario, except that it’s a margin account (opened with a personal check worth $5000) and I sell on a Monday at 2% profit. Since this is a margin account, does that mean as soon as the sell transaction is completed, my buying power is now $5100 (on Monday)? If I decide to buy another stock, say on Tuesday (which is before the T+3 settle date), worth $5000 again, will my account incur any interest or other charges? Keep in mind, the maximum amount I intend to use for the purchase is $5100, which is essentially my “own” money, except that I have been granted access to it before the T+3 days settle date since it’s a margin account.
I would really appreciate it if someone could explain this to me. Thanks.
May 30th, 2007 at 5:07 am
Kirk,
Yes, your understanding is correct. That is why I usually open margin accounts even I may not plan to use margin.
ML
May 30th, 2007 at 5:58 am
ML, thank you for clearing that up. I really appreciate it.
June 16th, 2007 at 9:26 am
Hi again, I have a question about day trading regulations. Yesterday, I placed a buy order for 130 shares and upon checking Zecco’s “Executions” tab, I noticed that the order had been split into 2 entries (100 shares @ $xx.xx and 30 shares @ $xx.xx).
Later that day, I placed a sell order and noticed under “Executions” that the order had been split into 3 entries (90 shares @ $xx.xx, 30 shares @ $xx.xx and 10 shares @ $xx.xx).
So does this count as 5 total trades and therefore classify me as a Pattern Day Trader?
Thanks.
June 16th, 2007 at 6:02 pm
Kirk,
They should counts as two trades only. You get this kind of “partial fills” often as the exchange tries to match buy and sell orders. If you were to use a broker that charged commission, you would be charged 2x commission only.
Zecco has a trade counter although it takes a day for it to catch up.
June 18th, 2007 at 6:58 am
Thanks ML. One last question (for now), if I understand the definition of a “day trade” correctly, would that be ONE day trade (I could be wrong)?
June 18th, 2007 at 10:44 am
Kirk,
Yes. 1 round trip in a day. Could be either long or short.
June 18th, 2007 at 11:34 am
Thanks for the help, ML.
July 9th, 2007 at 3:45 pm
I had problems making my first deposit when joining, they sent me an email with the with the wrong bank account number(it was missing a 0). Plus I searched through all my emails and they never sent me a customer number.
The only number I got was a reference number which I used for the deposit which went no where. Anyways after a few weeks of having my moneys in no where, I’ve got it back and I’m happily trading away now.
November 27th, 2007 at 2:58 pm
I would have to agree with the sentiment that “Zecco sucks”. I don’t normally take the time to write such reviews, and I would generally choose different words. But I would not recommend them to anyone. Perhaps they are just experiencing growing pains. I have almost memorized their customer service number - always something wrong. The executions are good, because they use an underlying provider - Penson. But their website, customer service, timeliness will put you at risk. Perhaps they will get better over time. But I would advise you to use someone else… you get what you pay for.
December 20th, 2007 at 4:36 pm
I Need Help I put a buy in for a stock that was running .0003 and purchased 200000 shares. Problem is the transaction went for .005. Now I am in for a 1000 dollar loss. what do I do. I put in for a market order. why would i pay so much? ticker is ADZR
Help Jerry
February 7th, 2008 at 7:07 pm
I have been using Zecco for quite some time now and I too had some early problems. However, there customer service people were quite helpful and most everything is smooth now. I say “most” because I keep getting errors when I click on Add External ACH account. I have sent them two emails (the last one today).
I have found that it frequently takes more than one email to get results, but that could be attributed to growing pains.
One more note: their streaming quotes feature is an extra cost option while it is provided at no extra charge by ScotTrade.
March 19th, 2008 at 5:10 am
I would just like to point out that more than six weeks to fix the bug is not ridiculous. I work as a web developer for a financial institution, and trust me, you do not want a fix rushed. A bad fix is worse than no fix. There could be any number of issues, some of which may be outside of Zecco’s control, that must be addressed. Other than that, thanks for a great review. I am thinking of using Zecco to get my kids started. Just trying to learn the basics, so the missing extra options probably won’t bother me.
March 19th, 2008 at 9:37 pm
If you are going to go with Zecco make sure you keep your accounting record up to date. I left them for a while (6 months) and went back because I thought I could deal with them loosing-NOT TAX WITHOLDING-my money and after 3 weeks I left again.
I’m an auditor and I can’t stand the fact that they would loose my money for a week at a time and then it would reappear no matter how many calls to customer service.
Good luck…I pay $9 per trade now but they NEVER loose my money-no I’m not a rookie, I been a daytraded for a while now…have fun!!
March 20th, 2008 at 4:05 am
I’ve been looking for a low-cost broker that offers no fee or flat fee pricing on an unlimited number of shares at any price per share. Many brokers, including the current one I use, impose extra charges for shares under $1 or for trades of more than 1,000 shares. I ended up deciding upon ChoiceTrade, which offers $5 flat fee trades. I decided against Zecco for all the reported problems they have. I am willing to pay something for a reliable and dependable service. Yet, what I pay is much less than what I would be paying at Fidelity if I stuck with them for all my trading.