IB : Cancellation of the open order, but not the closing one...

F

fredcom

Hi,
I need your help.

Monday, 6th october, I submited 2 orders on the TWS Interactive Brokers.
The first was the Parent order and was for a Buy of 2000 DNDN (Nasdaq stock) at 4.67$ Limit.
The 2nd was a Child (only submited if the parent is filled), and was for a Sell of 2000 DNDN at 5.13$ Limit.

Few seconds later,at 9:45, the Parent order is filled, and I was Long of 2000 shares of DNDN at 4.65$.
5 minutes later, at 09:50, as the price raised quickly, the Sell order is filled at 5.13$, and I was happy to have a P/L of +960$.

But, 15 minutes later, at 10:05, I saw on my IB account that I was short of 2000 DNDN at 5.13$. At this moment, the last was at 7.11$.
5 minutes later, at 10:10, I received a message telling me that "NYSE/ARCA has ruled to cancel all trades in DNDN between 9:45:00 and 9:48 ET due to a regulatory halt".
At this moment, I had an unrealized P/L of more than -3000$.

As it was the first time that this arrived to me, I didn't know if I was really short or not? Is IB going to regularize or not (by cancelling the sell order)?

Few hours later when I received the Statement, the Short position was confirmed.
I closed my position at the next Open at 6.65$ --> loss of -3000$.

I understand that a trade can be cancelled AFTER it has been filled, that's the (bad) rules.
But, don't you think that the broker have the obligation to cancel also the close order, as I was flat at the moment of the cancel?
I open a "ticket" at IB message center but don't have answer at the moment.
What can I do?

Thanks for your help and for sharing your experience.
 
This is only my opinion because I don't know the way these things work and I'm assuming they're the same as IF DONE Orders in forex, but logically they should cancel the child order if the parent order was cancelled, ie if the first leg wasn't valid then naturally the second leg can't be either as it was contingent on the parent order being executed.

I take it you closed the unexpected short position to limit your loss pending investigation? You want to hope they don't agree to cancel the child order but leave you long from 6.65, especially if price is at 3 bucks or something, it might be worth checking as you could be worse off than you are now in theory!

The whole system sucks really, closed trades should stay closed and not re-opened hours later. If they need to cancel off one side of a trade they should cancel off the whole thing so even though there's no gain at least there's no loss, fair's fair.
 
Quote from fredcom:

Hi,
I need your help.

Thanks for your help and for sharing your experience.
More...

Sorry to hear your story. I doubt IB would agree to re-imburse you. Their reason would be you did not have to be in possession of the stock to initial a sell, since you could sell short with the same exact order. That is one reason I do not like their interface, where all you specify is SELL even if you mean SELL SHORT. With Ameritrade and some other brokers, the option to SELL SHORT is different from SELL to CLOSE, and you cannot mistakenly use SELL TO CLOSE if you do not already have the stock: the order will be rejected. Similarly you cannot use SELL to initiate a short.

It's awful finding yourself short a stock you intend to just sell to close your positions just because the quantity you specified is greater than what you hold. Happened to me there.
 
I sympathize with you. That's a nasty thing to have happen.

Unfortunately, it's just one of the risks of trading and in particular, one of the risks of electronic trading. It's easy to blame IB in this instance (I'm glad you didn't), but they had nothing to do with it. When the exchange busts trades, there is just nothing you or IB can do AFAIK. They can't possibly absorb losses and risk from exchange trade busts. So it goes to the trader.

I've had a few busts, so I have some experience. In your case, it is exactly as if you manually traded DNDN. The same thing would have happened - the closing order would put you short the stock, since the opening order was busted. Why can't the exchange simply cancel BOTH orders, to put you flat? I've asked this many times before. It's only fair, isn't it? It wasn't your fault. As long as a trader can prove that the order executed after the bust, was the closing order, why not cancel both? There would be a long chain of busts, but fair is fair.

Alas, the trading world is not fair for the small trader. We just have to trudge on...

Good trading to you. :)
 
Quote from neke:

That is one reason I do not like their interface, where all you specify is SELL even if you mean SELL SHORT. With Ameritrade and some other brokers, the option to SELL SHORT is different from SELL to CLOSE, and you cannot mistakenly use SELL TO CLOSE if you do not already have the stock: the order will be rejected. Similarly you cannot use SELL to initiate a short.
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Sorry to say but even if his order had been designated SELL and the buy order had been busted several hours later, he would still be caught short. It is not like they will cancel the second leg, just because you said it was a SELL, as opposed to a SELL SHORT.
 
Quote from fredcom:

Hi,
I need your help.
More...

Even though your situation sucks and is unfair, I don't think there is anything you can do in this case. The stock was halted by the exchanges during your first fill so it is as if that fill never happened. IB has nothing to do with the decision of halting a stock. However, I am surprised that you were allowed to submit the order in the first place during a halt. Usually, the IB TWS will tell you when a stock is halted if you try to place an order in for it. Did you submit the order before the halt took place?

Anyway, just because you submitted a parent-child order doesn't really get you off the hook because a stock halt is one of those special circumstances that no brokerage can plan for. I.e., IB thought you had the position long just like you did so the child order then went active. Only when the bust notification came could IB possibly do anything about the problem on a parent-child order, but since the bust came after you had already sold, what can they do?

The busting policies of exchanges are so arbitrary that you cannot prepare for them. You just have to accept that there is a possibility that you might get reamed on a bust decision. I am sorry that you lost on this one.

As for busting out all pairs of trades as a solution, that would affect later people's trades that were entirely outside of the bust window. So at some point you just have to clamp that window to affect as few people as possible and unfortunately this time it meant you. Better luck next time.
 
Thanks for your understanding.

I agree with the interest to make a difference between SELL (for closing a long position), and SELL SHORT (for opening a short position). For automatic trading, as I do, it will be sometimes a very good thing to avoid bad trades.
But in my problem, the Open long trade was cancelled AFTER I'd closed my position, leaving me with a Short position I never asked.
ARCA just know my open position.
That’s why I think that canceling both Open and close orders should be fair...
If my open order was canceled before I closed the position, there is nothing to say, as rules are rules.
But where is the confidence in the system if this could happened at anytime? This is an important point, isn't it?

I know that I’m a small trader and there is small (or none) chance that I could be re-imburse by IB (or other).
The biggest problem, I think, is that IB is just an intermediary as it was ARCA that canceled my order... I understand that asking IB to re-imburse means that IB have to deal with ARCA, for me, before anything!

My little finger told me that I’ll probably stay with my loss ;-(

For sprstpd:
My open Buy long order was submited at 09:45:58 as a Parent order, the closing Sell order was transmited at the same time (but not submited until the parent order should be filled).
You are right, it's during the slot time declared as a "regulatory halt" by ARCA.
But my order was accepted and submitted and filled (I've the clientID# and ExecID# of each trade with the IB Audit trail).
I really don't understand why my order was filled (or seemed to be) if it was "regulatory halt" between 9:45:00 and 9:48 ET.
I closed my long position at 09:50:19 (after the halt).
ARCA canceled the open long order at 10:05...

Ones again, where is the confidence in the system if this could happened at anytime?


If someone else have others experiences, you’re welcome.

Whatever, I will give you information about my “ticket” with IB.
 
Well, one thing is for sure is that this kind of thing doesn't happen very often. You can't be scared to take a trade just because it might be busted later due to some arbitrary decision.

As for busting the other side of your trade, just think what that does to the other person on THAT trade. You would have a domino effect of busts. The only rational way of handling this is to bust only the trades that fall within the halt window.

And finally, if you really wanted to pursue this further, I would ask IB why they even let you submit an order into a security that was halted. I am almost positive that they already have checks built into the system that will not allow you to trade a security that is halted. I wonder why this didn't work in this particular case. Maybe ARCA itself is again to blame - maybe they did not shut down their exchange properly on this symbol during the halt window.
 
sprstpd -->
I understand the domino effect if, x days after, they cancel my closing Sell order and bust the opposite person with the Buy order.
The only way is that the closing Sell trade should be cancel only for me... that's mean that IB (or other) pay... probably no chance.

I think you put the finger on the good argument : why IB lets me submit an order during the regulatory halt?
Depending of the answer on my initial "ticket trouble", I'll ask this question?

Thanks for your time and explanation.
 
fredcom, it is a sad situation. I hope IB's system will become robust enough to understand these type of situations to act reasonably. Just imagine, had it been an IRA, because of the system, you might have been ended up with a short position--which is not allowed.
 
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