Nasdaq Busts and my $11,000 story

Discussion in 'Order Execution' started by Htrader, Jun 17, 2005.

  1. Htrader

    Htrader Guest

    The following story is an example of the pitfalls inherent in trading and of the gross incompetence of the staff at the nasdaq.

    You have heard that nasdaq busted a number of trades at the open that were 15% off from previous closing prices. Most of these trades occured in very illiquid stocks, no big deal. Except that one of those stocks was IIJI, a huge momentum stock that traded 18million shares and is down 33% today on bad news.

    This morning I went long 20k shares of IIJI at 9:31am at 8.2, sold it all at 8.2 at 9:45am. I was playing for an opening bounce, didn't get it, no big deal, quickly forgot about the trade. At 4:00pm today, I checked all my trades, everything looked good and I shut down my system. Then about an hour ago, I get an email from IB, my broker, that nasdaq has decided to bust 11,000 shares of my original buy of IIJI at 8.2 at 9:31am. These were all the shares that were executed via supersoes. All the other trades on ECNs stand. So now I'm short 11k shares at a price of 8.2. Stock closed at 7.11. If prices stay about the same on monday, I could cover for a 11k gain. You might guess I'm happy, but not really. And here's why.

    1. Nasdaq made the decision to bust the trade AFTER the close. And over 8 hours AFTER the original trade. Outrageous.

    2. Nasdaq contradicted a direct statement they made at 2:30pm that no further trades would be busted. They also specifically said in that statement that the decision was "not appealable." Guess they changed their minds. Outrageous.

    3. The trades made in IIJI at the open were completely valid. Stock was down over 15% because of bad news and not because of any trading error. There was no reason for the trades to be busted. Especially since it was only the supersoes trade, and not the ECN trades that was busted.

    So assuming nasdaq doesn't change their minds again and unbust the busts on monday, which is possible, I'll probably cover for a gain. But my confidence in the nasdaq system has been significantly lowered, as this trade could have easily gone the other way. And the nasdaq people apparently have no sense of fairness or proper market decorum.
  2. lescor


    Wow, that is beyond outrageous. Just mind-boggling. Is this the supposedly world-best american system or something from a third world country?

    The sad thing is that it probably won't get much press outside of trading circles and absolutely nothing will be done.

    How can one have confidence in a system that operates like this?
  3. I don’t think you get the profit anyway. It’s a short sell violation and all profits can be taken away from you.
  4. Ebo


    He gets to keep it .....regardless of the uptick rule. I would get the signature of a compliance officer @ the broker to cover my behind before trading out of it.
  5. MR.NBBO


    You eat the profits or losses on the busted's not a true short sale, but if you don't unwind it, your broker can bring it in anytime they please.

    I've had these over & over....try complaining to your broker that it was an illegal short sale & you shouldn't have to eat the loss.....hahhaha :p :eek:
  6. You think <b>you</b> feel shitty, imagine how the guy on the other end of that bust must feel!
  7. 1) IIJI is NOT on the list of 174 busted stocks.

    2) Even if it was , it would be an outrage for them to bust those trades considering the stock traded very easily and happily at that level all day on the publicly available BAD NEWS.

    3) Something stinks about this one.

    PS On further investigation, IIJI was on the original Opening Cross adjust list, BUT , is now listed there as NOT BEING ADJUSTED.

    As I said. something smelly here.
  8. One might think so, but the Nasdaq does not enforce its own rules. This happened to many COCO sellers last year on ARCA during a specific time period before the stock officially reopened. The sells stood, but the earlier buys (a window of less than ten minutes) were busted a few hours later by Nasdaq, leaving many supposedly illegal shorts to cover later in the afternoon after COCO completely recovered its losses.

    For me, a $95K gain turned into a $78K loss. Next time, I won't be so quick to provide liquidity when the market needs it.
  9. You can't. Because one day a "trading error" will knock the market down 10%, and all of the buyers who stepped in will get long, then their trades will be busted.

    The chief executive of the Nasdaq Robert Greifeld, who got a $4.7 million signing bonus in May, will earn at least $2.5 million this year.
  10. I would print out multiple copies of that email just so nothing happens to it...

    Could you or someone please tell me what you mean by Nasdaq BUSTED the trade?
    #10     Jun 17, 2005