See below, press release from the CBOT, regrading the July 3 Mini-Dow mistrade. Frankly, I think this is nonsense. See this quote: "Contrary to rumors that have circulated regarding this activity, the catalyst for the market break was not an order entry error. Rather, a large sell stop order was triggered, which, upon execution, elected additional sell stops at incrementally lower prices. " My question is simple: SO WHAT? Is this not the way the market is supposed to work. If a large sell-stop order triggers other sell stops in a cascade so be it...... What do you guys think? ************** The Chicago Board of Trade?s Business Conduct Committee recently reviewed an investigative report prepared by the Office of Investigations and Audits regarding activity in the mini-sized *Dow futures market on July 3, 2003, and determined that there was no basis to conclude that the actions of any market participant violated Exchange rules. On July 3, 2003, the CBOT®?ini-sized Dow futures experienced a sudden break of approximately 560 points in less than a minute. There was no economic or fundamental reason for the decline and the Exchange therefore promptly invoked its mistrade policy. Contrary to rumors that have circulated regarding this activity, the catalyst for the market break was not an order entry error. Rather, a large sell stop order was triggered, which, upon execution, elected additional sell stops at incrementally lower prices. The cumulative effect of the cascading stops and the new sell orders entered as the market declined created an unusual order imbalance that caused the price of the mini-sized Dow to break sharply and become substantially misaligned relative to all other related markets. Based on its review of this incident, the CBOT made several amendments to its mistrade policy to strengthen the bias toward trade certainty in mistrade scenarios and thus reduce the likelihood that trades will be invalidated. Additionally, in conjunction with the CBOT?s migration to its new electronic trading platform in November 2003, the Exchange will have additional functionality that will reduce the incidence of mistrades, as well as mitigate the impact of potential mistrades that do occur. Questions in this regard may be directed to Dean Payton, Office of Investigations & Audits, telephone (312) 435-3658. Paul J. Draths Vice President and Secretary
it should stand. Period. That is the only way people can be sure of the markets integrity, also far more problems caused by trying to "fix" a mistrade. Anyone who has been in the market for even a brief period of time knows that these big spikes are to be expected from time to trime. This is why most veteran traders use mental stops rather than stops sitting on their brokers computer.
Bullshit that's the way they usually clean the market for a big move , I even said it that it was not a mistake and that it will be for a big move.
What nonsense CBOTs response will undermine further tarnish the reputation of that place. What a joke, busting all those trades,... and then this response. The last bit about the new electronic platform............. nonsense
SO WHAT, ya got it!!! A trade is a trade.. the trades should stand BUT AGAIN and AGAIN big money gets free "get out of jail card" small traders get screwed again
It happened the way the CBOT described it. Yea busting trades sux, but how can anyone argue that the integrity of the market would be protected by allowing trades 500pts lower than the index to stand. You guys would be bullshit if it was your protective stop 40pts lower that got filled 400 lower. There have been 5 of these trades that I can recall in the last year plus in ES, NQ, and YM. None have been fat fingers per se. The reality is, at any given time there are literally thousands of contracts sitting as stops, with not enough limit orders protecting them.
the process of busting trades does tarnish the markets integrity. Which trades get busted and which don't (ie the cut off) is arbitrary and if one can't have confidence that their trades when executed will stand how can anyone enter the market with any confidence only to be left net short or net long after trades are busted and possibly with a margin call to boot. One way that I deal with this type of even is that I always have some way out of the money options on the opposite side of my trade. If it is a spike then I don't plan on getting out on the spike anyway, if it is a real move (ie 9/11) then my options will act as a stop and give me time to get out of the position in as favorable way as possible under the circumstances.
May be reached at: (312) 435-3605 By the way, ask him if there is a BUY STOP that catapulted prices dramatically higher . . . would they then bust trades? Don't think so.
Like the CME didn't bust trades last year when a 4000 lot after the NYSE close took ES up 100 POINTS!!