I agree, the selling pressure was massive. We had giant moves down in the past, no one called it an error then. I think the heavy selling caused a few wires to bust.
Since my order didn't route to other market centers it traded around every other order. For example if ARCA had been bidding $15.76, my sell offer would have skipped by him entirely and executed with the best INET bid. The trades were simply busted and removed from the tape and charts as if they never happened. Last week was legitimate selling all the way up and down. There was no fat finger. The exchanges and officials are more comfortable with the fat finger version of things. That way they don't have to admit how fragile the markets are. As if a zillion euros being printed out of thin air is supposed to inspire confidence. Listen to the call of the S&P audio during the crash. It was all legitimate selling. On the way back up it went 1180 bid to 1181 bid to 1185 bid to 1187 bid to 1191 bid, with barely any contracts trading as far as I can tell from the audio. All you hear is 'there's no offer in the pit', It was simply a fast moving market. That's all.
I agree with Achilles that all those sell orders that caused all those busted trades were most certainly naked shorting. If anyone looks at the entire list it is mostly low volume, thinly traded ETFs and those had to be market orders to sell the best explanation is shorts opening up naked positions. Also I'd like to point out that this the original posters first post ... and while I do hope for the best if he's telling the truth ... my ears says troll alert.
Not to deny that the OP made a mistake that an experienced person would avoid, but why is the OP's mistake greater than that of the person who willingly sold at $.20? Yet the OP bears 100% of the loss, and then some. The OP's experience highlights a critical problem with the existing bust system: You can't know that a trade was at a "bad price" until after the fact. If you could, the trade wouldn't have occurred in the first place, QED... There are no rules as to which trades, specifically, are bustable, and which are not -- only "guidelines" (I guess Jack Sparrow was right ). This is a nontrivial risk for any short-term market participant, and probably contributed to some of the bigger houses pulling their bids/asks when things went screwy on Thurs. (No one knew ahead of time that the cutoff would be 60%. Try finding that in the "rules" ) That said, things have improved a lot over the last few years as they've streamlined the "clearly erroneous" guidelines. But ultimately, the trade bust system is an anachronism that screams for replacement with something better and more fair. The "individual stock circuit breakers" idea now being developed between the SEC and the exchanges is, in my opinion, a step in the right direction: http://finance.yahoo.com/news/SEC-E...5.html?x=0&sec=topStories&pos=1&asset=&ccode= I think they also need to ban market orders entirely (my guess is that the seller at $.20 used a market order); market orders simply don't make sense in the context of today's markets, and a lot of this sort of pain/regret could be spared if everyone were required to enter some price beyond which they don't want the trade.
Good post. Just a correction, however. Unlikely that that order really was placed as a market order. More likely was a stop loss order that got turned into a market order when it was triggered... And as a result, there were essentially massive numbers of market orders smashing through the limited available bids when the liquidity dried up. So you are basically then suggesting that they need to ban stop loss orders unless they are stop limit orders, and of course are able to be skipped over. No real good solution here, imo. g
Well, Globex for example uses Stop with Protection for stop market orders. If you send a stop market order, the exchange converts it into a stop limit with limit price of half the no bust range of the product. Same goes with plain market orders. Send it off, and it's automatically converted to a marketable limit order, with the limit price half the no bust range away from the last price. Something like that in equities would prevent someone selling at market what they think will be around $40, but turns out to be $0.01 after the sell order finds liquidity.
In essence then, you support the idea of rewarding people for making mistakes and screwing people over who trade well.
This is a common misconception. You do NOT reduce risk by doing this. Consider the following example: a story hits the wires saying there is a suitcase nuke released in NYC. Your favourite stock drops 25% immediately and then starts selling off hard. You get filled on longs at a price down 50% from the open. The market then bounces 25% from your entry price. Following your rule, you do not sell, because you do not know if you are long or flat. Then over the wires news comes out that LA has been hit, then Chicago. The stock goes to down 90% and you get fucked. So your rule didn't help, it meant you got trapped in your position. Let's say you do sell - then it comes out that the wire story was a fake placed by an offshore hedge fund. All trades get busted and you end up short stock from down 25% and having to cover at +10% on the day as the stock ramps under short-covering. So based on pure luck, whichever route you take, you risk losing 40%-80% on your trade and there is nothing you can do about it except simply not trade during any kind of major market crash or down move. This is why anyone who defends trade busts is a retarded moron with no clue about markets and ZERO experience trading during true crashes (e.g. 9/11). Or someone who is just totally corrupt.