----- 4. If the arb was done automatically by exchange computers, IB would lose out on arb commissions. I like you def, but there is no way that you can convince me that the arbs did their job when the ES - SP differential was that big.
The big pit is not electronic thus how can it be done by computers? I've been in pits during fast markets and I can only imagine there were few offers to be found in the pit when ES spiked. If I understand what you mean by stating the exchange should do the arb then which market would you make the price leader? I think a stronger argument for the move could be made against trailing stops and stop limit orders placed way out of range or with wide limits (in effect making them market orders). As for IB losing out on Arb commissions, I think the arb game from the pit to the screen is mostly done by locals and professional firms which own seats and are fully automated. commissions aren't the issue.
Appearently there are many 'traders' that are simply clueless when it comes to how ELECTRONIC exchanges work. What a shock. Now here's a little tidbit that may answer some of the complaints we hear about 'stops' not getting filled. =========================================== Should a floor broker who is handling a stop order be held liable if the market on GLOBEX ticks up or down after the stop order was elected but before it was filled? _______________________________________________________ Under Rule 540, a floor broker should not be held responsible for executing or failing to execute an order unless the floor broker acted negligently. Because of the way in which orders are executed on GLOBEX in strict price and time priority, it is entirely possible for E-mini contracts to be traded at multiple prices on GLOBEX during the seconds that it will take for the floor broker to enter a stop order after it has been elected. Assuming that no broker negligence was involved, the broker should not be held responsible for the fact that other trades were executed on GLOBEX at a better price than the stop order he was handling.
That's completely different. The Raes system just takes the pit prices. As many believe that ES leads the pit these days, that isn't a simple solution.
If you did biz development for CME, believed that these type of incidents will become much more frequent in the near future, and believe a PR catastrophe may be looming, what would you do to change the way they are traded? Everything I see suggests CME/CBOT is very successfully targeting small traders with these contracts. A wholesale wipeout to the tune of a grand or much more per contract is something they have to have thought about. Thoughts? Geo.
Well, a RAES like system may not be the perfect answer, but its better than your idea to eliminate overnight stops for position traders :eek: Now that I think about it more: since emini spikes almost always occur in the 15-minute period after the cash market closes, perhaps up and down limits, just for this period of time would solve the problem. IMHO
I don't believe that the markets need any more regulation than there already is. Those sell limits/stops were knowingly put in place by traders. There was no fraud,collusion, or anything else that forced traders to enter those orders. They knowingly let those orders sit in the afterhours section. If those trades were allowed to stand, the market would sold off the next day to the previous days levels. People need to learn to take responsibility for their own actions.
I've been on the wrong side of 2 NQ spikes, and 1 ES spike. I have to say that it looked like manipulation. Someone with a book of all the orders and stops up to 80 points above the market can do real damage when he sees that liquidity is low. All it would take is a 2 people. One puts in a buy for a few thousand contracts, the other puts a limit sell 80 points above the market. They split the profits. The fact that these spikes don't go up 1000 points is evidence that it is planned. Otherwise, who would have sold into these spikes?
This doesn't mean there wasn't fraud involved. Certainly there are risks using market stops, or just being in the market. I could say the same of the people in the hijacked airplanes that crashed into the WTC building. I'm sure all of them knew what the word hijack means, and that it can happen on airplanes. So lets not change any rules at the airports, people should just know theres an inherent risk with flying and take responsibility for their own actions. Your logic makes a lot of sense.