Busting a trade

Discussion in 'Professional Trading' started by heech, Mar 18, 2009.

  1. heech


    So... I'm really not a career trader, just an aspiring one. That's probably why I don't know the answer to this one.

    What the heck is a busted trade?

    I've done enough googling around to guess what it basically is. I know IB charges you $50 to declare a busted trade. My guess is that you have some fixed amount of time to declare a busted trade (due to "mistake"), and get the trade reversed.

    Can someone fill in the details? Do you get in trouble for frequently "busting" a trade? How do they crack down on people who basically take speculative positions, and then "bust" the trade within 20 minutes if it doesn't go there way>

    There are absolutely times when this is potentially useful to me, especially since I'm auto-trading (and code can sometimes go bad). And the $50 cost is really a joke, considering how much a trade going the wrong way usually costs me. I just want to make sure I understand the process.
  2. It's when the little guy gets f'd over by the big boys who are members of the club.

    In order to bust, the trade must have occurred X% away from the nbbo to bust it. Look for those large spikes that occassionally occur within stocks. and those are the candidates to get busted.

    Nasdaq has posted some guidance, check out the marketwatch site.
  3. Shhh, don't let the secret out of the bag...:eek:
  4. Dustin


  5. TraDaToR


    You don't bust a trade because it has gone the wrong way...

    You can ask for a trade bust to the exchange if you have been filled far out of the intsrument fair value.
    There are "no bust ranges " on futures for example.

    For example, a spike occur because of a fat finger, this spike is like 2x daily range and your stop order is filled at the top of it. In this case you can require a bust.
  6. Surdo


    Is that anything like busting a nut?
  7. heech


    Gotcha. Well, that's still good info, because some of my fills have been ridiculous.

    Thank ya.