There was a 4pm cutoff. But the idiot knew that, that is why he shorted just 1 minute before the close. Like I said before, there are idiots that try to find ways around risk management because they think risk management is stopping them from making money. The 700:1 wasn't suppose to be allowed. Pairco and Bright's risk management didn't catch this idiot until after he had already gone over 700:1. Bright doesn't use the risk management software to automatically limit accounts from doing certain things, like taking too much buying power. I think they only limit how many shares you can have in an individual position. No firms risk management is perfect, just like there isn't a bank vault that can't be robbed if someone is determined to do it.
Lets be honest here. A true risk management application has position size or $ limits per position. Not some desk jockey watching everybody for foul ups. That firm deserved what they got. REDI+ prospector does I believe.
How would position size or $ limits per position have prevented this guy from putting on a trade 1 minute before the close(during mkt hours) and 3 minutes beforee earnings announcement?
We treat our traders as the (licensed) professionals they're supposed to be, and we fully expect them to follow the risk parameters assigned to them. We have excellent softwared, provided by Goldman, which is set to "pop up" if a trader has a 10% real time loss (40% gain, same risk concerns either way). We then check the account, see who it is, how long they've been with us, their open positions, etc. If need be, we call their Manager or the trader directly to see if there is something we might be missing. We might have to call 2 or 3 times per month. We only had 4 people affected during the 400 point down day (Feb 27), and 2 on the big down, back up swing day. We assume any losses in excess of their trading sub-accounts, as per our side of the agreement. I think that by respecting the traders we keep a good business/personal relationship, which is the way a good partnership should be. All the best, Don
It wouldn't have prevented the trade. But the right software would have prevented the size to create such a liability for the firm.