Nasdaq Busts and my $11,000 story

Thanks for the reply from IB.

The case of IIJI looked bad from the outset, as the stock was trading legitimately lower, and not part of a malfunction. There was no legitimate reason to bust those particular trades, which would have been apparent had t&s been examined.

I have no problem with busts that are clearly at bad prices, as long as those are handled consistently.
 
Quote from Htrader:

Update.

You guys won't believe what actually happened with this trade. All my frustration with nasdaq has now been shifted to IB.

This weekend, I did my research and noticed that IIJI was NOT part of the final stock list that nasdaq issued. According to the published alerts, there should have been no busts in that stock.

So I called IB at 8:00am, right when they open, and spoke to a regular there, and that person informed me that the busts were real. He said he called nasdaq and confirmed everything, and that while IIJI was not on the final list of busted stocks, it was on a prior list. That answer still sounded kinda strange to me, but I assumed since he checked with nasdaq that it was good.

So right after that conversation, I covered my 11k share short of IIJI at 7.05 in the premarket. That turned out be a lifesaver.

Fast forward to 1pm, 5 HOURS later, I get another email from IB saying that those original busts were in fact INCORRECT. It turns out nasdaq didn't sent IB an actual list of all the trades to be busted. Rather, it sent a criteria of which trades should be busted. So based on that criteria, IB made its own decision of which trades to bust. And mine was busted...incorrectly. Why this didn't come up in my original conversation with them at 8am? I have no idea. Why did it take over 3 days for IB to realize its mistake? Who knows.

I now am long 11k shares of IIJI at 7.05, which I promptly sell at 7.25. But IB makes another mistake in unbusting the original busts and gives me 3000 extra shares, so I have to call them, get put on hold for 5 minutes, and then correct that.

End result is I made about 2k, since I bought at 7.05 and sold at 7.25, but the whole story is quite ridiculous.
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Interesting read, and while my first choice is not to make money on mistakes like that, that will work also.

:cool:

Also have noticed while IB does make mistakes , most actually favor me and dont know about 3 day timetable???

And Wilburbear;
got a somewhat funny, to me anyway,red message from IB past week ''AMEX not being able to trade OPTIONS DUE TO TEK DIFFICULTIES''
At least IB sent the e-message!!!:cool:
 
today, 06/23/2005 they still adjusting\bust their trades. i got bust on position,which already been adjusted on friday after close.unbelievable!
 
So, your SuperSoes was busted an the ECN trades stood. Hmmmm......

Evidently the ability to "hide" orders and "parse" orders under SuperSoes was not worth it, and the only way to have found this out was to have been at this disadvantaged $11,000 gain (which might possibly become a loss, should they deem it as an illegal short).

Did you seek legal counsel and begin the process of moving your account to another broker? This might be the right circumstances and time to consider such a strategy. You were advised to escalate this, by one of the other commentators.

I noticed IIJI move from below $5 and stabilize just under the $7 range. Once it achieved $7, I regretted not having taken a swing position, although I told myself, this was going to be a profitable ride. It peaked at and above $14. What surprised me was how fast it surrendered the $11.50 - $12.25 area on the way down, and almost in less than 1 week's trading days, was under the $8.50 range. Evidently you were caught up in that fiasco too.

Thanks for letting others know about this, and sorry to have heard about your pain.





Quote from Htrader:

The following story is an example of the pitfalls inherent in trading and of the gross incompetence of the staff at the nasdaq.

You have heard that nasdaq busted a number of trades at the open that were 15% off from previous closing prices. Most of these trades occured in very illiquid stocks, no big deal. Except that one of those stocks was IIJI, a huge momentum stock that traded 18million shares and is down 33% today on bad news.

This morning I went long 20k shares of IIJI at 9:31am at 8.2, sold it all at 8.2 at 9:45am. I was playing for an opening bounce, didn't get it, no big deal, quickly forgot about the trade. At 4:00pm today, I checked all my trades, everything looked good and I shut down my system. Then about an hour ago, I get an email from IB, my broker, that nasdaq has decided to bust 11,000 shares of my original buy of IIJI at 8.2 at 9:31am. These were all the shares that were executed via supersoes. All the other trades on ECNs stand. So now I'm short 11k shares at a price of 8.2. Stock closed at 7.11. If prices stay about the same on monday, I could cover for a 11k gain. You might guess I'm happy, but not really. And here's why.

1. Nasdaq made the decision to bust the trade AFTER the close. And over 8 hours AFTER the original trade. Outrageous.

2. Nasdaq contradicted a direct statement they made at 2:30pm that no further trades would be busted. They also specifically said in that statement that the decision was "not appealable." Guess they changed their minds. Outrageous.

3. The trades made in IIJI at the open were completely valid. Stock was down over 15% because of bad news and not because of any trading error. There was no reason for the trades to be busted. Especially since it was only the supersoes trade, and not the ECN trades that was busted.

So assuming nasdaq doesn't change their minds again and unbust the busts on monday, which is possible, I'll probably cover for a gain. But my confidence in the nasdaq system has been significantly lowered, as this trade could have easily gone the other way. And the nasdaq people apparently have no sense of fairness or proper market decorum.
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Can someone here Please explain exactly what happen here ? What do they mean busted rule?

Im lost in all this and trying to make simple heads and tales from this so that I dont make the same mistake.
 
Quote from couponjohn:

Can someone here Please explain exactly what happen here ? What do they mean busted rule?
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Here is an example of a bust:

There is a buyer and a seller on a single trade. The buyer erroneously entered a price that was $1 higher than the current market (say on INET) and calls in to have the trade "busted." INET rules on whether the trade is "clearly erroneous." In this case, they say "bust the trade" and it is as if the trade never occurred.

Now imagine this happening on a larger scale - some hedge fund erroneously puts in an order to buy 1 million shares, $10 higher than the market. They probably took out thousands of orders on the book with that order. They will call in to have all those trades busted (or most of them). Meanwhile, there is utter confusion and inevitably people close out the second part of their trades in the confusion. Then the busts come in and they are left holding the bag.
 
So if you short a stock and then rebuy it and some one up above goes bust, they pretty much sc#ew your short sale latter on even though you never knew it?
 
Quote from couponjohn:

So if you short a stock and then rebuy it and some one up above goes bust, they pretty much sc#ew your short sale latter on even though you never knew it?
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Exactly. So you thought you were flat with a profit, but now you are long shares. And the way it usually works is that by covering you have a loss on those long shares by the time the bust notification comes in.
 
Quote from couponjohn:

Is there any way to prevent this, and i dont mean a reply such as dont buy stock?
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There is no foolproof way to avoid this, but if you ever get a fill that seems too good to be true just don't close it out until a couple hours later. Sometimes I will wait an hour, then close half of the position and wait until just before the close for the rest.
 
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