Are there brokers that do not use price capping?

I get it, but the exchange doesn’t want to be involved with erroneous trade resolutions and broker doesn’t want to explain during audit why these happened. That’s why some proprietary trading firms can have edges that you as “retail” trader cannot replicate even if you find them.

 

What makes you think a proprietary trading firm does not need to follow exchange rules?

 

These are not rules, they are guidelines. I’m talking about firms that take care of their own compliance and use Lightspeed, for example, purely for technology to route orders.

 

They have their own special risk calculations and might not need to follow as it will slow down HFT

 

The incredibly obvious solution to this problem is to design the exchange engine such that erroneous executions are not matched in the first place.

In other words if an exchange matches a trade it should be "not erroneous" by definition.

EDIT: I know, keep dreaming, right?

 

what's an erroneous execution that was matched?