What's not fair? CBOT giving a free ride to a company that supposedly made a "mistake". Either bust everything that traded today, or let the big order execution stand. What are you going to do next time when drop like this happens????
I'm quite sympathetic to anyone who loses money in a situation like todays. However prior to the advent of electronic trading mistakes(sic) like these also occurred. In the pit though it was illegal to bust a trade or change a price! Guys have done Federal prison time for what the exchanges each do a couple a times a year now, i.e. rewriting trade history. Those who have been around will remember that the Wens. after Sept. 87's "Black Monday", the front running of a Quantum Fund order took the S&P's down almost 70 points! That was about a 25% break!! No trades busted and Lewis Borsellino made about 2mil in 2mins. buying the last of the order on the lows as the market rallied back about 30pts on air.
i want this BOGUS spike off all my charts!! it's screwing everything up! actually, this is an interesting issue. is it bogus or not? should what the market does always be accepted? or should errors be fixed??????? to answer this, i think you really need to set aside how it impacted you today, or how a similar event did in the past. if you made money off it today, don't complain next time when it hurts you and vice versa. BE OBJECTIVE. as for me, i have to think about it... FRuiTY
The problem as I see it (and this really is bullshit because a lot of people trade the indices because they aren't affected like a single company -- bankruptcies, etc) is that busting trades is going to piss off a lot of people and NOT BUSTING trades is going to piss off a lot of people. However, someone should be held accountable. If it is a problem with the computers, who is in charge of those computers? If a clerk makes a mistake, then invest in some halfway decent procedures not to allow for that to happen. This is supposed to be a pure and free market. What happens to the guy who sold at 8800 and bought at 1920? Now he has a short position and could be screwed because of someone elses error. The wrong people are eatting other people's screwups. That's BS. There should be a lot more accountability. Some people could stomach this, but other people could easily get wiped out.
exchanges that cancel trades suck. this is not professional at all. markets are for grown up people. every market participant is responsible for the trades he is entering, full stop. where do we arrive if an exchange can bust some trades and some not? what does the guy do that sold dax or ftse futures in the selling hole this afternoon based on the dow collapse and his trades do not get busted? what does the currency trader say who bought eur/usd at 1.1530 based on the dow spike and finds himself long the shit back @ 1.1510? there's no mum in there to cancel these trades. i did not trade today, did not loose and did not win. but from my point of view, there is no discussion that never ever exchanges should allow for busting trades due to errors made by stupid jerks. such is life. if i sell 100 minis instead of 1, i loose a lot of money, no trades get busted, so why should we come up for an error of an even bigger jerk selling 10,000 instead of 100? a similar thing happende some time ago in the eurex dax future. the most terrible thing was that for several hours while the market continued to move, it was not clear which trades were busted and which not, you did not have any idea whether you had a position, covered a position or whatsoever. completely irresponsible from the exchanges. my word is my bond. a trade is a trade, full stop. absolutely ridiculous what happened today.
IMO the "Solomon" (the King, not the investment banking firm) decision would have been to fill everyone on the open outcry low.
CBOT Probes Big Error in Dow Futures By Ros Krasny CHICAGO (Reuters) - The Chicago Board of Trade, the No. 2 U.S. futures exchange, said it is investigating a huge trading error in its mini Dow Jones futures contract on Thursday that briefly sent the entire U.S. stock market reeling. Trading sources said a large futures commission house entered an order to sell 10,000 contracts of mini Dow futures instead of the intended 100 contracts. With average daily trading volume of about 48,000 contracts in June, the mini-Dow futures contract -- which is traded electronically on the CBOT's a/c/e platform -- plummeted when hit by the supersized sell order. "We are investigating as a matter of course. I don't really have anything more to report at this stage," said CBOT spokeswoman Laura LaBarbera. Selling signals radiating out of the mini-Dow contract quickly dragged down the Dow Jones Industrial average (^DJI - news) about 50 points, and hit S&P 500 futures and cash indexes as well. "Mini-Dow futures are not build to absorb that kind of action," said Kevin Pendley, president of CharTable Research, who trades mini stock index futures at the CBOT and at the Chicago Mercantile Exchange, the largest U.S. futures exchange. The selling hit just when stocks were mounting a rally on the back of report showing a surprisingly strong result for the U.S. services sector in June. "There was sudden, intense volatility with no news -- it certainly acted like there was some kind of error," Pendley said. All-electronic mini stock index futures have been a huge growth area for the Chicago exchanges, attracting interest from day traders and individual investors and increasingly from institutions attracted to their liquidity. CBOT mini-Dow futures typically trade much larger volume than the exchange's original DJIA futures, where the contract size is twice as large. Floor traders at the CBOT said the ability of the massive error to slide through, unchecked, showed a potential dark side of electronic trading -- although big errors have been made in traditional open-outcry trading as well. MISTAKE BRINGS TO MIND OTHER SCREEN-TRADING BLUNDERS In October 2002, a trader at Bear Stearns Cos. Inc. (NYSE:BSC - news) entered an erroneous order to sell $4 billion worth of stocks 20 minutes before the closing bell, fueling an already tumbling market. Bear Stearns said the order was the result of a "clerical error" and should have been entered as $4 million. In December, the New York Stock Exchange (news - web sites) released a memo reminding members of their responsibility to guard against such orders, saying a number of erroneous orders had been sent to the exchange through electronic order entry system. At the time, the NYSE said many of the orders were the result of human mistakes or defective software that sent orders for an incorrect number of shares or resent stock orders from the previous trading day. The No. 1 U.S. stock exchange reminded firms they must have an electronic order entry system in place that limits who can use the system and that can limit or prohibit orders that exceed a firm's current credit.
Was flat when it happened, and don't trade YM. For the CBOT it was a slip-up, and it's not surprising that they would bust trades off such a huge move. Fair is another thing, though, and they really should have circuit-breakers against moves like this - so that everyone knows ahead of time where trading will be stopped. Explicit, precise rules about when and how trades will be busted would also be helpful. (If they do exist somewhere, maybe they need to be more broadly publicized.) Everyone does know pretty well though, by now, that if a big player hits the wrong button, he gets taken care of. If one of us normal guys hits the wrong button... we hit the wrong button. The traders who made what they thought were good, opportunistic longs on the counterreaction, then closed, but, after the trades were busted, found themselves short, should arguably be aware that conventional trading rules don't apply on totally out-of-the-envelope moves. There's a difference between reflexively taking the other side of an exaggerated move and rushing in when something is seriously out of whack. When an index futures contract moves 6% in less than a minute, any trade you take until things are sorted out, or at least until you know exactly what has (or hasn't) happened is pure gambling. On the other hand, for the other indices the event was similar to a big news headline or rumor that turns out to be inaccurate. After 9/11, for instance, we had a few big reactions to news headlines that on further analysis turned out to be overblown or entirely bogus. Arbitrage creates a more intimate connection between all markets, making this case different, but the principle remains the same (though not the principal). To me, the way Globex and the brokers handled the outage a couple months ago was at least as unfair to small traders. How open positions were going to be handled remained a mystery for hours, and there was much misinformation spread around. Situation normal...