Busting Trade Based on Volume

N

NotKenGriffin

Saw this posted elsewhere which was interesting. It appears a trade was entered for 30,000 contracts when it should have been 3,000 and was later adjusted:
https://imgur.com/a/civzSV2

At first I assumed it was just a broker who just fat fingered a block spread, but it appears to be marked as part of a CBOE Price Improvement Auction. I've never seen a trade bust based on volume before (only erroneous/catastrophic price).

Anyone know how the rules around getting this adjusted? Did the person who made the mistake just get lucky that the counter-party appears to have agreed to a mutual adjust?
 
Does the other post mention if the volume was adjusted by the trader, the trader's FCM, the trader's firm RM, or the exchange ?

NotKenGriffin said:
Saw this posted elsewhere which was interesting. It appears a trade was entered for 30,000 contracts when it should have been 3,000 and was later adjusted:
https://imgur.com/a/civzSV2

At first I assumed it was just a broker who just fat fingered a block spread, but it appears to be marked as part of a CBOE Price Improvement Auction. I've never seen a trade bust based on volume before (only erroneous/catastrophic price).

Anyone know how the rules around getting this adjusted? Did the person who made the mistake just get lucky that the counter-party appears to have agreed to a mutual adjust?
More...
 
bone said:
Does the other post mention if the volume was adjusted by the trader, the trader's FCM, the trader's firm RM, or the exchange ?
More...

No further information unfortunately.

Wouldn't RM = Exchange = CBOE in this instance? These are SPY options (equities not index futures) so not sure FCM would be involved.
 
RM = Risk Manager. My thought was that since the guy was able to enter 30,000 was that most likely he was employed at a proprietary trading firm, which would mean that his orders and his positions are under the close oversight of a firm Risk Manager. The exchange and the clearing firm will limit order size depending upon the account capital on hand. I have serious doubts that an independent trader had the required allowances to enter that size of an order. I'm guessing but it's based on experience.

NotKenGriffin said:
No further information unfortunately.

Wouldn't RM = Exchange = CBOE in this instance? These are SPY options (equities not index futures) so not sure FCM would be involved.
More...
 
bone said:
RM = Risk Manager. My thought was that since the guy was able to enter 30,000 was that most likely he was employed at a proprietary trading firm, which would mean that his orders and his positions are under the close oversight of a firm Risk Manager. The exchange and the clearing firm will limit order size depending upon the account capital on hand. I have serious doubt that an independent trader had the required allowances to enter that size of an order. I'm guessing but it's based on experience.
More...

Sorry, I thought RM = Regulated Market.

Yes, this is definitely not retail order flow. If risk comes in and says you need to unwind, isn't the trader just going to have basically sweep those 27,000 at market price to close or does the directive potentially coming from a clearing firm give him an out to bust/adjust? I'm surprised the order would make it all the way through to the PIA if clearing firm wasn't okay with size.
 
Well, my guess is that the volume checked with the entire firm's equity on hand on the clearing firm and exchange checks level. This is surprising to me, because the proprietary firm's Risk Manager always puts hard machine limits on individual traders in terms of order entry limits and capabilities. That's his job. If he still has one, that is.

NotKenGriffin said:
Sorry, I thought RM = Regulated Market.

Yes, this is definitely not retail order flow. If risk comes in and says you need to unwind, isn't the trader just going to have basically sweep those 27,000 at market price to close or does the directive potentially coming from a clearing firm give him an out to bust/adjust? I'm surprised the order would make it all the way through to the PIA if clearing firm wasn't okay with size.
More...
 
NotKenGriffin said:
Saw this posted elsewhere which was interesting. It appears a trade was entered for 30,000 contracts when it should have been 3,000 and was later adjusted:
https://imgur.com/a/civzSV2

At first I assumed it was just a broker who just fat fingered a block spread, but it appears to be marked as part of a CBOE Price Improvement Auction. I've never seen a trade bust based on volume before (only erroneous/catastrophic price).

Anyone know how the rules around getting this adjusted? Did the person who made the mistake just get lucky that the counter-party appears to have agreed to a mutual adjust?
More...
If it was a trade of a Price Improvement Auction, then both counterparties were the same broker.
 
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