Whoa Baby! What happened?

cheeks · Feb 4, 2003

Quote from Lobster:

I disagree. But since all the "electronic exchange" casinos seem to be operating like this, I suppose I am in the minority.

If I buy 2000 shares instead of 200, do you think anyone breaks my trade?

Fair would be to have clients check their orders before they send them to the exchange, and if they fail, it should be their own loss. They could buy "moron clerk insurance" for scenarios like that. It should not be the exchanges' concern.

But what happens to the little guy that was short and got margin liquidated at 920+, if those trades are not broken?

Lobster · Feb 4, 2003

Quote from Lobster:

The point is if you are going to bust trades based solely upon price action, it is your responsibility to do everything you can (like add some 20 bytes of code to the matching algorithm) to prevent these trades from printing in the first place.

Sorry to quote myself, but upon second thought: IF you had the mental capacity and computer skills to implement such a mechanism, you wouldn't be running an exchange, you would be a profitable arbitrageur. Those who can't make a living trading obviously drop out into running exchanges.

Quah · Feb 4, 2003

Quote from cheeks:

But what happens to the little guy that was short and got margin liquidated at 920+, if those trades are not broken?

Same thing that is going to happen to those shorts that covered at 859 - they are gonna lose.

If you happened to cover at 861, you will be busted and be fine. If you covered earlier than 860, you are gonna get screwed.

Lobster · Feb 4, 2003

Quote from cheeks:

But what happens to the little guy that was short and got margin liquidated at 920+, if those trades are not broken?

Actually, what happens to that guy now that the trades have been broken? Will his broker just give him a courtesy-unliquidation? Something tells me not.

Quah · Feb 4, 2003

Quote from Lobster:

Actually, what happens to that guy now that the trades have been broken? Will his broker just give him a courtesy-unliquidation? Something tells me not.

Exactly - especially if that liqudation happened with a fill less than 860!

cheeks · Feb 4, 2003

Quote from Quah:

Same thing that is going to happen to those shorts that covered at 859 - they are gonna lose.

If you happened to cover at 861, you will be busted and be fine. If you covered earlier than 860, you are gonna get screwed.

True. And I agree.

This is just one of those messes that is not cleaned up easily. I do think you have to punish whoever did this by making them eat some of this.

Not saying this is a perfect solution.

acrary · Feb 4, 2003

SPH3 peaked at 85400 @3:11. Seems to me that should be the break trade point. Why give a windfall of 6 pts. to the arbitrage guys?

cheeks · Feb 4, 2003

Quote from Lobster:

Actually, what happens to that guy now that the trades have been broken? Will his broker just give him a courtesy-unliquidation? Something tells me not.

I don't quite follow. If the trades are broken he is still short.

FienyxTrader · Feb 4, 2003

I WAS short 2 eminis......and YES I did have a heart-attack when the futures SHOT up!!!! Luckily I didnt panic because I didnt see the big S&P's following....did anyone else notice that?

Quote from GATrader:

Looks like I picked the right time to stop trading e minis. I resolved today to go back to stocks and options after getting my ass kicked in futures. This AM I closed my account. With my luck I probably would have been short my 2 lots and whammo!! A/... would you like fries with that? If this is not a sign from providence I don't know what is....

Lobster · Feb 4, 2003

Quote from cheeks:

I don't quite follow. If the trades are broken he is still short.

That's true if ESH3 was his only position, but if he had other contracts or stocks in his account, they might have been liquidated because of the huge (albeit temporary) drop in account equity. Let's say I have an IB universal account with 20 different long stock positions and short ESH3 as a hedge. The spike would have caused the ESH3 to be liquidated at a loss of say $4000 per contract, way more than maintenance margin. Now my equity is suddenly negative or way too low to meet the stock margin requirement. The broker will sell all my stocks (after hours!) and leave me with an additional huge loss there.