Advice About Sept 2nd GLOBEX Oct. Cattle Trade Not Busted

C*F · Sep 5, 2008

Hi All,

I'm looking for some advice regarding any recourse I may have for a trade executed from a price spike in GLOBEX Oct. Cattle on the morning of Sept. 2nd.

I contacted my broker (Interactive Brokers) a few hours after execution inquiring about busting the trade. The rep. informed me that I must request a bust within 8 minutes after the trade. I notice from the CME rules that some trades can be busted later depending upon liquidity of that market.

I am surprised that no one else requested these trades to be busted. The rep. assured me that GLOBEX control is keeping an eye out and would certainly bust these trades if it was warranted.

I appreciate any information you can provide about this issue.

Thanks.

Chris

cszulc · Sep 6, 2008

What was the price executed at and what time?

youngtrader · Sep 6, 2008

Hey buddy, you trade the meats you send the orders to the pit.......plain and simple

C*F · Sep 6, 2008

Quote from cszulc:

What was the price executed at and what time?

I used a stop-limit instead of a straight stop, so my orders were executed a few minutes after the price spike (at approx 07:00 a.m. ET) in the 106.25 to 106.45 range.

C*F · Sep 6, 2008

Quote from youngtrader:

Hey buddy, you trade the meats you send the orders to the pit.......plain and simple

I need to double check, but I don't believe Interactive Brokers supports stop orders for CME pit trades (IB TWS only allows stop orders for GLOBEX). Since I don't monitor the markets at all times, I rely on stop orders to get me in and out of the markets.

I may ultimately have to start sending the meat orders to a different broker that supports stop orders for pit trades.

Thanks for your reply.

bone · Sep 6, 2008

Never use stops or market execution orders without limits in electronic markets. Especially overnight and in thin markets. Also, every exchange publishes allowable trading ranges - know them before you trade that market. I have had exchanges (ICE) call me and ask to bust trades as a favor for institutions because I knew what the exchange rules were, but the bank's client did not. This was especially prevalent in the 90's on Globex and Project A.

C*F · Sep 7, 2008

Quote from bone:

Never use stops or market execution orders without limits in electronic markets. Especially overnight and in thin markets. Also, every exchange publishes allowable trading ranges - know them before you trade that market. I have had exchanges (ICE) call me and ask to bust trades as a favor for institutions because I knew what the exchange rules were, but the bank's client did not. This was especially prevalent in the 90's on Globex and Project A.

Thanks for the reply, bone. While I didn't get stopped out of a huge position, I am frustrated that Interactive Brokers and/or GLOBEX Control Center did nothing about this specific "price spike" that was significantly away from "fair" (pit value); even the next 2 contract months didn't spike as high during overnight trading (and I don't think I would have been stopped out if I had a position in those "less liquid" months).

I guess (as you suggest) caution is warranted in electronic markets since anything can happen, especially some wild moves during the U.S. overnight periods.

Hurricane · Sep 7, 2008

Another thing you have to consider is that someone else is on the opposite side of that trade. When they didn't receive notification of a trade bust in an orderly manner, they would have felt free to liquidate their position and may have done so. It doesn't excuse CME if they weren't properly monitoring trades but does make it unreasonble to bust outside their normal guidelines.

battle river · Sep 8, 2008

that was in pre market wasnt it? i find they rarely bust anything in after hours if it was. you're pretty much stuck now though

C*F · Sep 9, 2008

Quote from Hurricane:

Another thing you have to consider is that someone else is on the opposite side of that trade. When they didn't receive notification of a trade bust in an orderly manner, they would have felt free to liquidate their position and may have done so. It doesn't excuse CME if they weren't properly monitoring trades but does make it unreasonble to bust outside their normal guidelines.

Quote from battle river:

that was in pre market wasnt it? i find they rarely bust anything in after hours if it was. you're pretty much stuck now though

Thanks for the replies.

Yes, it was in the pre-market. I have only had electronic trades from regular trading hours busted in the past. So I guess I am stuck and I will move on to the next trade.

I agree that it is impractical to bust a trade in an untimely matter, since traders will adjust their positions under the assumption that the trade stands (even if a few traders accidentally got "pushed" out of the "right" side of the market). I guess the warning "trader beware" applies (along with "tough noogies" during these "mishaps").

At least the Interactive Brokers rep was kind enough to tell me to "have a nice day".