Incorrect broker statement - is broker liable?

S

SideShowBob

My broker apparently had a system problem yesterday and failed to allocate a trade to my account during the day (trades were entered by an automated trading system). I noticed at end of day I was not flat (this happens occasionally due to a problem in the synchronization) and closed out the open position (or so I thought - I was actually flat but their system showed I was long, so I sold one contract to go flat according to their system).

End result, I was short a futures contract overnight. Their nightly statements did not show the open position. This morning they discovered the problem and added the short position to my account, now down $700. As soon as the "fill" appeared this morning I noticed it and closed out the position.

Question - since their statements and system were incorrect, do I have any recourse? Not sure it's worth my time but I'm royally pissed eating a loss because of their error.
 
You could always lean on them. For $700 they may just roll over if you push. I suspect they disclaim liability through a disclosure, but, if you're like me and deliver $100s on commissions a month, who is legally right is less important than the customer being right.
 
I pay over $1m in commission a year. My broker statements were wrong for 2 months.

I got dinner.

Sure, you can and maybe should ask for something. Reduced fees would probably be the best thing to ask for that they can give without them feeling like they are compensating you for specific liability.

I'm just kind of irritated with the recent theme on this site (where a TT trader wants compensation for a canceled order) of trader customers thinking its their right to have perfect flawless execution and reporting at all times. There are a lot of moving parts and nothing is perfect. Service providers are held to best effort not an impossible standard of perfection.

Make a small ask and move on.
 
In a mediocre world they would be liable. Here in screw town it has more to do with who happens to be bent over and how much muscle they have. In your case the broker is likely to not be liable.

I have a master's degree in IT. This should happen never or so rarely that they can afford to pay. There is something called "journaling." Usually I see it in reference to file systems but the concept applies to databases as well. This is a database issue. If the journal isn't right they should not allow you to execute any opening trades until it gets right or they call you and work it out. Yes there are a lot of moving parts but its manageable. They should pay you 700 plus dinner and some complements and apologies. Good luck getting to anyone in a position to do so. I say email customer service once. Tell them you want to communicate with an executive or whoever that has the ability to write you a check. They will play dumb as if no one in the entire corporation can do that except for one guy that lives on the dark side of the moon. Then complain to finra. If they don't do anything also complain to the attorney general of either your state or theirs or one then the other. If it still does not get fixed tell us who your broker is so we can trash talk them to EVERYBODY.

Let us know how it works out.
 
Last edited:
garachen said:
Service providers are held to best effort not an impossible standard of perfection.
More...

Telecom carriers are expected to provide 99.999 percent up time. They usually cheat a litte. You might be surprised to see the lengths they go to.

It can be done. The brokers should have to choose. Are they going to do it, or are they going to pay when they don't. Or FINRA could start a broker-"oops" insurance fund to pay claims for broker screwups. Kind of like FDIC insurance for banks.

I agree though there is a disturbing trend of people wanting to go to war over any slight. Our civilization is loosing its slack, and its mind.
 
garachen said:
I pay over $1m in commission a year. My broker statements were wrong for 2 months.

I got dinner.

Sure, you can and maybe should ask for something. Reduced fees would probably be the best thing to ask for that they can give without them feeling like they are compensating you for specific liability.

I'm just kind of irritated with the recent theme on this site (where a TT trader wants compensation for a canceled order) of trader customers thinking its their right to have perfect flawless execution and reporting at all times. There are a lot of moving parts and nothing is perfect. Service providers are held to best effort not an impossible standard of perfection.

Make a small ask and move on.
More...
Maybe that's just the way it is, but it doesn't sound acceptable to me. I've never had a broker error on my end but it seems like something that should be made right.
 
SideShowBob said:
My broker apparently had a system problem yesterday and failed to allocate a trade to my account during the day (trades were entered by an automated trading system). I noticed at end of day I was not flat (this happens occasionally due to a problem in the synchronization) and closed out the open position (or so I thought - I was actually flat but their system showed I was long, so I sold one contract to go flat according to their system).

End result, I was short a futures contract overnight. Their nightly statements did not show the open position. This morning they discovered the problem and added the short position to my account, now down $700. As soon as the "fill" appeared this morning I noticed it and closed out the position.

Question - since their statements and system were incorrect, do I have any recourse? Not sure it's worth my time but I'm royally pissed eating a loss because of their error.
More...
Ok so... the below is how it works with my counterparties, might not apply to everyone's relationship:

- if you sent an order and you received a confirmation, e.g. through CQG or another platform. then your broker is liable. They have the trade and just didn't allocate it. However... it is YOUR job to reconcile daily and tell them within 24 hours that you have a contract missing (with the order confirmation ID).

- if you send an order and receive no response from the execution platform: that's when it's a grey zone. Normally you would call their desk in real time and say Hey I want to know the status of the order XXXX to have a voice confirmation that it was filled or not. Whatever they tell you over the phone, they are liable to it. This is part of regulation and if someone tells you on the phone that the order was filled and its not, then it's their problem.

- once the back-office fucked it up and we didn't see a small trade that was open for 3 months (we were doing over 1000 trades per day so we only reconciled the EOD p&l). This was our fault but also the brokers' as their system didn't send us a confirmation, which, in THEIR documentation, meant we didn't get filled... yet we were filled... we had a good dinner with management team and said look it's both our faults, let's split the loss.... they end up paying 120k$ not to lose our business... that's really where you want to have good relationships with your counter-parties but that was the only time it happened to me, all the other times brokers were just fcking brokers....
 
Maybe if they are nice, they will reimburse you with something, but it is likely you will have to eat the loss. I once had an error where a trade I never made was put on to my daily statement. What you do is contact them immediately about it and have them look at it. In my case, they fixed it that day. DO NOT try to flatten a trade that was mistakenly put on your daily statement. You will be on the hook for whatever position was created once they figure out the problem.
 
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