It’s no secret: investing in the stock market is not without its dangers, far from it. Volatility in the financial markets can cause heavy losses to savers who are unable to remain calm, panic and close their positions when prices fall. But the risk is also present when placing a buy or sell order, as explained by the broker of the Autorité des marchés financiers (AMF), Marielle Cohen-Branche, in her dossier published on Wednesday 3 November. Because placing a buy order on the market exposes the investor to the risk of acquiring the securities at a much higher price than expected. And the financial damage can be very significant.
>> Our Service – Try our Stock Accounts Comparator to lower stock exchange fees
In the case studied by the broker AMF, a client had placed on the market two purchase orders, on February 28, 2020, for shares listed on Euronext Growth. Two days later, he tries to connect to his trading space on his financial intermediary’s website, without success due to a glitch. He then notes that the price of the share in question jumped 145% compared to the date of his order, or 25 euros. Aware of the risk, the customer tries to cancel his orders and contacts a consultant who explains that he does not have the necessary access to enter their cancellation. Suspended the citation of the title until 11 am, he “then believed that his orders had not been carried out due to insufficiency of the provision”, specifies the mediator. But the next day is a cold shower: his balance seems to be a debtor of over 38 thousand euros. He then realizes that the orders were carried out despite his insufficient balance of him. Height of the situation: “His financial intermediary sent him an email urging him to recover the deficit under penalty of late sanctions”. He contacted a consultant from his financial institution who explained that he could not cancel orders once they were sent to the market, ordering him to sell his securities to recover the overdraft. The client runs away … when prices have fallen sharply and sells his 2,800 expensive shares and almost his entire portfolio to get his cash account (attached to the securities account) green.
>> Read also – Investing in the stock market: 6 criteria for choosing the right broker
“Bad surprises that can be very harmful”
Upset, he then contacted the MFA broker, claiming that if he could access his online customer space, or reach a consultant, he would logically have canceled his purchase orders given the exploding prices. And so he asks for the cancellation of his transactions. Contacted by the broker Marielle Cohen-Branche, the plant explains that it has checked the provision available on the cash account, calculated at the closing price of 10.20 euros and increased by an automatic precautionary margin set at 2%. “The institution added that at the time of placing the order, a warning was displayed about the significant risks of price fluctuations and liquidity on this value,” said the broker. Above all, the professional specifies that “orders sent to the market cannot be canceled, pursuant to the article relating to the characteristics of orders, contained in its general conditions”, even though he denies having been contacted by the dissatisfied customer. The broker of the stock policeman then tries to find out “if, in fact, a technical malfunction had affected the website and the telephone platform of the financial intermediary” … and obtains confirmation from the consultant for whom the client had turned cancel his orders. Above all, Marielle Cohen-Branche reminds the plant “that an order can be canceled as long as it has not been executed, as specified in the Euronext Market Rules.
>> Also read – Stock market: 6 tips for lazy investors
Have the right reflection
Faced with these elements, the plant finally undertakes to compensate for all damages caused to its customer. And if the latter had the right reflex to attempt to cancel his orders – with supporting evidence – before they were executed, this is not the case with all investors who would still avoid “nasty surprises that can be very harmful”.
>> Our service – Invest in cryptocurrencies (Bitcoin, Ethereum, etc.) thanks to our partner online buying and selling platform