I've been robbed

[caementarius]

Let's say you are an institution with a large position and you are working an order to sell it.

You set your sell algorithm on auto-pilot to calmly sell digestible chunks at random times, minimizing market impact.

Then, some information, like riots in the streets of Amsterdam (hey, it could happen..), causes many stocks to sell off 5-10%, especially those with high betas.

You get that sinking feeling in your stomach. Then, you realize that you're close to the point where trades would be busted at lower prices. At this point, you're best off just dumping your million shares of PWV..

- If someone buys them at crazy low prices, the trade will be "busted" and you'll end up with the shares later at stable market prices
- If alternatively someone buys them at fair market prices, you just successfully worked out of position, whew

It just seems to me like this can create an incentive to dump hard and turn a small crash into a big crash.

 

[number22]

Quote from caementarius:

It just seems to me like this can create an incentive to dump hard and turn a small crash into a big crash.

Absolutely, if nothing worst happened in the end, big players just came back with busting rule, on the other hand, if the fear was true, they just got out their position in time. shoot first, ask question later.

 

[jasonc]

What would happen if you did not have an account that was legally allowed to short stock. If you bought it and sold it and the one gets busted would you still have a short position though legally you are not allowed to have one?

 

[Il Principe]

Quote from jasonc:

What would happen if you did not have an account that was legally allowed to short stock. If you bought it and sold it and the one gets busted would you still have a short position though legally you are not allowed to have one?

You'll be notified within the next 3-5 days.

 

[businessstaxes]

if the broker or exhange is being an A-hole about it and won't cancle the trade, than just say F.U. a-hole,,i don't owe you any money..

it's not fault your exchange computer crashed and fcked everybody trades and accounts.

f.ck, they should just cancel and that the end of it.

i mean wtf this is same as being robbed. if the brokers don't cancel the trade...some brokers would cancel the trade and some won't depending on the client.

F.U man!

Quote from jasonc:

What would happen if you did not have an account that was legally allowed to short stock. If you bought it and sold it and the one gets busted would you still have a short position though legally you are not allowed to have one?

 

[Free Thinker]

Quote from businessstaxes:

if the broker or exhange is being an A-hole about it and won't cancle the trade, than just say F.U. a-hole,,i don't owe you any money..

it's not fault your exchange computer crashed and fcked everybody trades and accounts.

f.ck, they should just cancel and that the end of it.

i mean wtf this is same as being robbed. if the brokers don't cancel the trade...some brokers would cancel the trade and some won't depending on the client.

F.U man!

good luck with that. let us know how it works out.

 

[Robert Weinstein]

Quote from PocketChange:

Just another reason to trade futures.

CME has got their act together.
Clearly defined circuit breakers, Valid Trading Price Zones, No Bust Range and a Clearing Mechanism that is obligated to honor deals.
Their market orders are with protection from crazy fills.

Obviously many make their fortunes trading equities but anyone take a close look at the leveraged ETF's as the reason for flash crashes?

These Leveraged ETF's are tracking +/- 300% of their basket and if a component drops in price they would be obligated to amplify the effect.

I'm curious if any of their "institutional" sized trades were busted. After a certain range of market movement their computers are unloading 50K lots into the market.

Interesting point about market crashes. I think it is wrong to bust a trade totally. It rewards those that make mistakes and the worst part is that during a crash it pulls bids out of the market when they are needed most. Granted buying a $40+ stock for less than a dollar is an extreme example but why do some people on here say its the OPs fault for not knowing better and not saying the seller should know better?. if you place a stop loss market order should you know know better and so much more so? No one forced either party into the trade

I see PG also trades as a single stock future. Does anyone know what the prices looked like for the the PG SSF in price and volume during the crash?

My understanding is that the SSF have done about as well as the $2 bill but I could very well be wrong about that as I have not paid any attention to them since the EFP synthetic interest went to zero.

I did well that day but a couple of guys in the chat did much better including one guy smart enough (or lucky depending on your point of view) to buy AAPL at 202 and really cleaned up as he held for the majority of the gain back. I on the other hand faded the 30 yr tres futures and had my best trade of the year. I picked the tres futs because i though it was the best opportunity but I could see myself trying to pick up stocks on the cheap if I saw them. So much was going on and I didn't trust my quotes so I just stuck with one thing and that worked out well.

I know on the next crash (just a matter of time for us full time traders, as I been through 87, 01,08 and now 10) i will focus on futures as I don't want to be the one providing liquidity for a stock and have some bitch saying "it was a programming mistake i.e. we didn't think it through well enough before putting money on the line so the other guy should pay the price)

 

[Robert Weinstein]

Quote from caementarius:


like riots in the streets of Amsterdam (hey, it could happen..), causes many stocks to sell off 5-10%, especially those with high betas.

A busted large shipment or a crop that doesn't come in due to global warming is not impossible to fathom : o )

 

[Ghost of Cutten]

Quote from Red_Ink_inc:

The market was down 9-10% at it's worst levels. The OP bought a $17 stock for 20 cents. That's an 99% discount.

That stock move was a 'fake crash'. That's the clearest example or an erroneous trade you'll ever find.

As the old saying goes "Watch out when you're getting all you want. Fattening hogs ain't in luck."

But the seller FREELY CHOSE to sell at 20 cents. Why should he get the trade busted? At most, the trade should be *adjusted* to something like $12 or $14, if it turns out that 20 cents was totally unrealistic.

And what if it turned out 20 cents was a fair price e.g. accounting fraud, a bankrupting lawsuit etc?

Your post also completely ignores the downsides of trade busts as a general policy. They have literally NO benefit and lots of annoying and harmful costs.

 

[Ghost of Cutten]

Quote from Giucco:

A 99% discount is definitely too much of a good deal and I understand your point.

An error like this in the old days of the specialist, may not have cost the OP that much because I dont see how a specialist would have moved the stock down to $0.20.

Maybe OP buys it down 10%-30%, gets busted and is out reasonably less money at the worst. He can live to trade again. I just think we are getting the worst of it with these programs. Heads we win, Tails you lose.

99% sometimes will be way above fair value (e.g. company declares bankruptcy or delisting overnight), in which case your buy will stand and you will lose 100%.