The fact that it is going to arbitration gives you an advantage. If it was out of Instinet/Islands obvious error parameter (I believe it is 3% for stocks >$15) then they would bust it automatically. Having said that, I'm not sure if the technical problem IB experienced may have caused the trade (ie maybe the seller entered the order 4/5 hours ago and wanted to cancel but couldn't) my point is, under normal situations that trade would NOT be busted........
Here is Instinet's Clearly Erroneous Policy: http://instinetgroup.com/legal/trade_policy_guidelines.shtml
I'm not taking it to arbitration, I think instinet are going to rule. it hasn't appeared in my account. Thanks for all your replies I think I made the right decision by refusing to take the bust.
Actually, going through with the arbitration as a test is a good way to get to know the process. As for closing the account if you choose arbitration ... This would be an extremely stupid action since they would be risking regulatory complaints. There would be a problem if your account was closed merely because you choose arbitration: I am guessing that such an action would be grounds for an immediate lawsuit: I doubt the SEC or CFTC would be happy with firms that routinely closed customer accounts due to a single arbitration request. ......
Examine your personality carefully before proceeding with arbitration. I have been doing this for 20 years and have found I never really "won". The distraction was never really worth it, even in the big ones. Of course if you are the type to just "forget it" go right ahead!
Don't bust it. A lot of times its large funds / institutions who do these trades "outside" the market on purpose. Then they call up a market maker and ask for a market on a stock. The trader will look at the current bid/ask the last trades, etc, and quote a market which will reflect this. This is a scheme to get lower prices by the customer.
I'm not sure any market maker would fall for this. Isn't painting the tape illegal anyway? Who enforces it?