E*Trade Financial Corp. shares fell the most since April after the online brokerage said regulators are investigating trading practices at two of its units.
E*Trade slid 3.4 percent to $14.62 today. The Financial Industry Regulatory Authority told E*Trade on July 11 that it’s examining the order routing practices of E*Trade Securities LLC and G1 Execution Services LLC, according to the company’s quarterly report filed yesterday.
The company is trying to sell G1 Execution after disclosing earlier this year that it found “shortcomings” in how it measured whether customers were getting the best prices on their trades. In yesterday’s filing, New York-based E*Trade said it completed a review last year of order handling practices and pricing for trades between E*Trade Securities and G1 Execution, also known as G1X.
Regulators “may initiate investigations into the company’s historical practices which could subject it to monetary penalties and cease-and-desist orders, which could also prompt claims by customers of E*Trade Securities LLC,” the company said yesterday. “Any of these actions could materially and adversely affect the company’s broker-dealer businesses.”
E*Trade Chief Financial Officer Matthew Audette told analysts on a July 24 conference call that E*Trade is looking to sell G1X and expects to announce a divestiture within six months. Market-making profits are under pressure in the U.S. as computerized trading squeezes margins and volume stagnates.
A phone call and e-mail to E*Trade’s media relations department wasn’t returned. George Smaragdis, a spokesman for Finra, declined to comment.