Bad ticks closed my calendar spread positions

I found some threads about 'bad ticks':

https://www.elitetrader.com/et/threads/can-bad-ticks-trip-stops.56320/page-3
https://www.elitetrader.com/et/threads/bad-ticks.229453/

It seems 'bad ticks' is one of the common trading risks especially when you hold positions longer. Even if it can happen anytime, it could be more common on volatile or thin markets like recent markets. I don't think it's my broker's fault.

I haven't had any issue trading calendar spreads for more than a year but now I found 'bad ticks' issue can be one of the drawbacks or risks trading spread (actually, this is true to all longer term traders)

Market is a dangerous place. You shouldn't stay long in this dangerous place. Shorter the better. Every odds are against you in this place. Lesson learned.

Too bad..... :vomit:
 
Let's have a hypothetical example:

You have 10 contracts of /NG (Natural Gas) Jun-July calendar spread trading. Margin per one contract is currently only $600 while the outright /NG trading margin is $8500 per contract. During volatile market session, a bad tick happened and risk management system in your broker killed only one leg in your spread pair (this is what happened to me). Now your margin became $85000 (10 contracts) and as market is very volatile, your 10 contracts of outright positions can move quickly against you. It's guaranteed that you hit margin call on market close. This is a very realistic example. Isn't this scary to you?
 
@heispark isn't the issue that your FCM was using some type of auto-liquidation algo to manage risk and deal with margin breaches? I believe other FCMs will do a proper margin call and give you time to wire money (which wouldn't even be necessary in this situation but would have made the bad tick a non issue) to meet margin requirements before liquidating your position. Or did you have a stop in the market that got triggered?

Also they really aren’t liable if they were transparent about using that method to manage risk (auto liquidation) and didn’t do anything nefarious like jacking up margins suddenly or having a stake in the entity on the other side of your trade (some stories about IB come to mind)
 
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eternaldelight said:
@heispark isn't the issue that your FCM was using some type of auto-liquidation algo to manage risk and deal with margin breaches? I believe other FCMs will do a proper margin call and give you time to wire money (which wouldn't even be necessary in this situation but would have made the bad tick a non issue) to meet margin requirements before liquidating your position. Or did you have a stop in the market that got triggered?

Also they really aren’t liable if they were transparent about using that method to manage risk (auto liquidation)
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Hi,
I think every FCMs have implemented auto risk management systems more or less. I also think my broker won't treat margin calls and other risk policies differently (not sure as I haven't hit margin call yet with this broker). Yes, they do increase day trading discount margin time to time on volatile markets currently we see (They don't provide any discount on /NG trading at this time). My understanding is this is beyond FCMs controls. It happens with other brokers or data providers or platforms. Otherwise, they would have refunded fully.
I didn't use stop loss order as spread moves very very slowly. Now I have one more reason not to use SL order.
 
heispark said:
Ok, ok, it's AMP Futures. I really love this broker and haven't had big issues so far (except an old event in which my CQG /E6 position wasn't properly closed until next day. It was more than two years ago. Also not sure whom to blame. CQG? AMP?) but I am a bit disappointed now. Complex spread trading doesn't look very safe with this broker if such 'bad tick' would happen again. I wonder if this can happen with other professional brokers like Advantage Futures. As Bone said before, discount brokers don't fit serious spread traders. I had to listen to him.
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Have a look at Dorman Trading. Probably the best shop for futures traders. Not quite the frontend selection of AMP but it's a family business and they really know how to deal with traders. Used them a couple of years ago before I went direct access and they were insanely professional.
 
heispark said:
Let's have a hypothetical example:

You have 10 contracts of /NG (Natural Gas) Jun-July calendar spread trading. Margin per one contract is currently only $600 while the outright /NG trading margin is $8500 per contract. During volatile market session, a bad tick happened and risk management system in your broker killed only one leg in your spread pair (this is what happened to me). Now your margin became $85000 (10 contracts) and as market is very volatile, your 10 contracts of outright positions can move quickly against you. It's guaranteed that you hit margin call on market close. This is a very realistic example. Isn't this scary to you?
More...

That risk management system is not set up properly for spreads IMO. The total position's p/l and your net liquidity should be cause for a margin call, not one individual leg's volatile move. Otherwise, what is the point of hedging with another leg?

Thank you for sharing what happened. It's another risk to consider.
 
heispark said:
Last night 'bad ticks' happened and arbitrarily closed some of my spread positions. Originally, I opened Oct22-Nov22, July22-Aug22 and June23-July23 but now only July22 and Nov22 contracts are left. I closed them now because they are not the pairs I wanted to trade. My broker said:

Looks like a bad tick caused Risk to close your positions
i expect bad ticks to happen again....they are not common....but they do happen.

Although they compensated some cost, I still lost a decent amount of money due to this event. What is the 'bad tick'? I use Rithmic. Who has the responsibility on this? Broker or Rithmic? I've traded calendar spread for more than a year now and this is the first time it happened. As I mostly trade spread, this is quite scary and frustrating experience.....
If I change to some professional grade brokers, can I prevent this event?

Any feedback or advice?
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If the data is provided by Rithmic then it's Rithmic's fault not AMP although the quality of their "Risk" program does also raise some doubts over its competence. But if it's really the issue of these risk-control programs, every single broker's got them and if they are driven by data, then a bad data could potentially cause the same problem no matter the "professional grade" of a broker. My opinion.

This is why with every single financial service that any provider provides nowadays all slap you with a disclaimer that says their service is shitty that you are using it at your own risk; it can cause you losses and basically we told you about it so if you still use it, you are on your own and we are not responsible. Even though the provider is protected from some liability but they are still expected to provide a basic level of duty of care and competence and in this case a level of quality that any reasonable paying customer would expect otherwise they could still be found negligent. That disclaimer is not a fault-proof shield that excuse them from any responsibility for reliable data.
 
heispark said:
Last night 'bad ticks' happened and arbitrarily closed some of my spread positions. Originally, I opened Oct22-Nov22, July22-Aug22 and June23-July23 but now only July22 and Nov22 contracts are left. I closed them now because they are not the pairs I wanted to trade. My broker said:

Looks like a bad tick caused Risk to close your positions
i expect bad ticks to happen again....they are not common....but they do happen.

Although they compensated some cost, I still lost a decent amount of money due to this event. What is the 'bad tick'? I use Rithmic. Who has the responsibility on this? Broker or Rithmic? I've traded calendar spread for more than a year now and this is the first time it happened. As I mostly trade spread, this is quite scary and frustrating experience.....
If I change to some professional grade brokers, can I prevent this event?

Any feedback or advice?
More...

Yeah this is the reality of the matter. It is like a DUI on the road. A lot of people have "bad tick" code to catch the inevitable occurrence. It can be as simple as "if it looks out of range, then verify it with another tick or two and ignore until verified".

Alternately design the system so a single tick cannot push the system around so much.
 
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