Traders beware island scam

Discussion in 'Order Execution' started by Hitnruntrader, Aug 31, 2002.

  1. A little info for active traders. Here is a little story that just happened to me. I was in a trade recently where an institution was getting short at the market. The offer chased down about .15cents. When the offer was taken out in a mad panic people started to buy up an island offer that was still at the same price. This island offer happened to be exactly 1 point out of the market. This has happened to me before so i put in a save on my software. If the price is 51 cents or higher my software gives me a prompt saying are you sure you want to place this order. (if i ever see that i just click no). At the time this offer was eaten up the specialist on new york showed the offer 1 point higher for a mili second, and i mean mili second.(This is why i did not get my saving prompt asking me if i really want to place this order). It happened so fast i did not even see it, i went through the time and sales on my first alert after trading was over just so i would truly believe the specialist did actually show a point higher which was the truth. Upon figuring out what i had done, i phoned in immediately to put in a complaint with island. My firm made the calls and got the wheels in motion. It takes island a long time to get back to you. Around a half hour later i got a call saying that if i want to fight it, it will cost 200$ win or lose. If you can believe this at this time the stock had moved up 80cents and i was only down roughly 200$ on my 1000 shares. So i said dont bother trying to fight it, i will burn on the 200$, not the end of the world. (Still pissed at the whole episode, but life goes on). I did not sell my shares right away because the stock looked strong. The stock continued to climb and i actually made a profit on the trade! WOW

    I sold my shares and was happy. The stock continued to go up even higher. WOW I continued trading.

    Roughly 1 hour later my position showed me in a short position of 300 shares of that same stock. The stock had even continued higher so it was showing me down money. What the heck is this crap? About 2 hours after the original episode island decided to break part of my trade. My original trade of 1000 shares went through in 2 prints, 1 of 300 shares and 1 of 700 shares. These guys at island waited 2 hours to break it once they had seen how high the stock had went. Tell me how can you wait 2 hours? If the stock had gone lower would they have broke the trade giving me a positive cash position. Not a chance. Oh i understand wait and see how high the stock goes first. And if anyone can comment how the heck can you break only 1 of the 2 prints? What kind of a gong show are they running over there?

    In the past i have heard other people complain of the same thing (buying 1 even point out of the market). Island is acting like i did something wrong. Tell me does anyone know these orders that are exactly 1 point out of the market, are the people that are placing them working for island? This has been going on for a long time. Does island not know who these people are? The nyse would not put up with this crap. Those people would be banned from trading if they didn't clean up their act. If anyone would like to comment it would be appreciated.

    P.S - The firm i go through is very respectable and treat me awesome. They are going to eat the loss for me. And if you can believe this island is trying to charge them the 200$ fee for fighting it. Thank you Echotrade!
  2. click on "edit"
  3. Thanks dude!

  4. I see this happen about once a week: the specialist's clerk makes a typing error that looks like the market has been spread by $1 on the bid or, 26.15 X 26.20 temporarily becomes 26.15 X 27.20, then quickly returns to the previous know its probably an error because it changes by exactly one dollar.

    On the island side, I got caught for $500 one time by clicking on a listed island offer not realizing it was one dollar above the nyse offer--ouch! I was mad for a couple days, but I realized that its my responsiblity to check the price before commiting to a much as I wanted to label the island seller a crook, I realize that trading is war...what he or she did was tricky, but not wrong.

  5. Exactly! The only wrong thing that goes on is Island's "clearly erroneous" bullsh!t. Whenever I get a load of that crap, I inquire about the details, and I have never received any response from the crooks at Island. None whatsoever. That indicates they know they are doing something illegal and they don't have a defense. But that's just how it is. And as long as everyone accepts it, nothing will change. I don't know if it's any consolation, but the circus monkeys who run Island don't engage in that kind of behavior because it makes them money, but they are merely the big players' puppets. That means they are left with guilt, but no gain.
  6. isld, salad, whatever.

    this sounds very frustrating. if true, it points out that they're going further and further to skin people. And dont forget, the specialist can execute over ecn's too -- he sees all the action on all ecn's. Of course, they have their own little shell game going on the floor and branching out that far might jeopardize their stuff.

    Too, we know they are all altar boys and would never do such a thing.

    On the other hand: a one point decimal error can be legitimate. Looking at a 10-key number pad one can see what some of the more common errors would be. If a quote only shows up for a moment, it could be an error that was corrected, and someone just happened to get filled there. Then it was like someone found a wallet in the street and offered to return it for $500.

    Too, it could be some jive computer program that looks for this stuff. I heard of one a long time ago called a 'snake.' It was designed to seek out obvious price errors and execute against them if 'arbitrage' (if you can call it that) opportunity exists.

    I have seem some weird crap going on on ISLD (I think I wrote about that here, too, somewhere) when I used to trade alot after hours. Once I called a tech there and he said, "Yeah, I see what you see, and, yeah, people might be out there with software that does what you're seeing but, no, we can't do anything about it." I had other things to do than talk to a lawyer about it.

    In any event, a trade way outside the market will be broken by the NASD.
  7. That is not a scam or a mistake; just someone making a market $1 away from the primary exchange; welcome to the club ...
  8. Exactly.
  9. mgkrebs


    I fell for it once. Fortunately just 100 shares. I said, jeez, what a dumbass, of myself. Then started posting a few of the same type offers myself. Never actually got a fill on one. Also put a postit on the monitor "look at the handle!"
    #10     Aug 31, 2002