How long does a MM have to bust a trade

A

ArfdogPerson

Question - OTCBB/Pinks

How long after a trade is filled does a market maker have to notify the correspondent that a trade was filled 'in error', they are busting it, etc? I had a notification of a bust reach me 1 hour after the fact, trades disappeared from the front end at that time so I suspect NITE didn't notify them until that time.

It seems obvious a correspondent should be notified in minutes, but is there a set rule?
 
I've heard 2 hours but others might have better data. Doesn't make sense that it would be minutes for an OTC stock. With electronic matching, first the person on the other side of the trade has to notify their broker, who has to put in notice with the exchange, that has to review the data, etc.
 
Quote from Hurricane:

I've heard 2 hours but others might have better data. Doesn't make sense that it would be minutes for an OTC stock. With electronic matching, first the person on the other side of the trade has to notify their broker, who has to put in notice with the exchange, that has to review the data, etc.
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Yeah you have to request a trade be busted, and it takes about a half hour for the exchange to confirm. However they will only bust the trade if the trade was something like 15%, maybe 14% away from the last trade price.
 
in this case, on a pink sheet stock, NITE came back an hour after the trade and busted it. they said it was filled in error (I believe this, they seem to have filled their entire queue at the current market and from what I heard other people at other firms had the prints at that time/price busted as well.

the frightening thing is that this was an hour later on a touted stock and the price could have moved sharply and I could have sold already and been upside down, thus I want to know what real recourse I might have. the retail firm I traded through seemed totally uninterested in contesting nite's action.
 
i recall something like 20% off of last print, and yes it has to be requested. years back i remember a fat finger f up on a stock at over a hundred less per share, for many shares, blotters showing astronomical amounts for the scalpers that were quick enough.
the trick if you get an insane fill, and i mean insane, is not to cover, if you cover you can end up in a very bad position if it gets busted. of course this is much less common as there is no more cross overs on ecn's, and those will be missed.

as for timeline, yes minutes would be nice, however same trading day is likely the answer.

i apologize if this doesnt apply to pink sheets for the o.p, i was a nyse trader at the time only. personally hate pinks ) as a teenager caught the top of ibzt for my biggest loss ever, no more risk like that thank you .
 
this fill was 4% above the offer at the time, but NITE routinely fills outside the inside market on pinks now. As such, the fill didn't really seem unusually and wasn't one I would think was too good to be true, it just meant he had a seller there with size.
 
Quote from ArfdogPerson:

in this case, on a pink sheet stock, NITE came back an hour after the trade and busted it. they said it was filled in error (I believe this, they seem to have filled their entire queue at the current market and from what I heard other people at other firms had the prints at that time/price busted as well.

the frightening thing is that this was an hour later on a touted stock and the price could have moved sharply and I could have sold already and been upside down, thus I want to know what real recourse I might have. the retail firm I traded through seemed totally uninterested in contesting nite's action.
More...

With exchanges, they have a system by which a disinterested group at the exchange "rules" on the bust. Who "rules" in a case such as this one, where NITE itself is hardly a "disinterested party"? I'm not sure who your recourse would be, when your trade is routed to an MM directly (whether as a PFOF arrangement or otherwise). Who do you go to -- your broker? FINRA? the SEC (as if they've got the time for this)?

In any event, your experience strikes me as yet another reason to completely abolish payment-for-order-flow, and to force all trading onto open, competitive exchanges. (FYI, I think many of the more active OTC stocks can be traded on ARCA.)
 
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