Something weird happened today. I trade with Global using PATS standalone system. I finished an e-mini trade and wanted to cancel the unused stop order I had in place from the trade. When I clicked to PULL the order, the order status changed to CP (cancel pending) and it remained an active working order. I clicked a few more times and nothing changed. Now the market was getting closer to where my stop was and I definitely had no intention of being in this trade. So I phoned the firm and was told that other people were having the same problem and they would call RCG (the clearing firm). RCG said it's a GLOBEX problem. I'm surprised nobody blamed it on the Bush administration or the UN for that matter. Finally, they said the problem was the order was never assigned an order number by GLOBEX and was therefore uncancellable. It was just suspended in cyberspace. So I asked them if the order gets triggered and there's a loss, who's responsible? The person I spoke to said he didn't know but implied that it probably wasn't them. In the end, RCG managed to find and cancel the order thru something I never heard of called OASIS. The order would have been triggered a couple of minutes later. Does anyone know who's legally responsible for this? Probably me, right?
Read your agreement, but it more than likely says that you would have been responsible for whatever happens while entering orders electronically. Every agreement I've seen says that.
Nice to hear from you Quah! Hope all is going well. I can understand that I'm responsible for my mistakes (I've made plenty of those), but if I call the order desk BEFORE the order is filled and try to cancel, then am I still responsible?
Yeah, unless you're a big customer. Every agreement I've seen involving any kind of electronic order entry puts the full responsibility on you, the trader. I've had similar problems in the past. That's why I have two brokers, so I can always offset in the event of a bad scenario like you've described. At least in your case *if* you were filled you would know about it. Then you can just enter an offsetting order and win or lose a few ticks. (My particular case the broker couldn't even confirm or deny my position for over 6 hours.)
I guess this is the reality of the wild and wacky world of electronic futures trading. I remember the old days when I traded equities (I wasn't a big client then either) and the broker could just journal a trade to the error account. Does this kind of thing happen often? Is it more likely to happen with one clearing firm than another? I'm afraid to press the button.
A couple of months ago I put in an order to close out 1000 shrs of AMAT through IB. A few minutes later I noticed my trade was executed at $2, 13 pts below the mkt. I immediately called IB and told them of the error and they said they would look into it. I assumed it was just an incorrect print and my account would reflect the change. As the day went on and AMAT was falling I called back several times and was told they were working on it. Three hours later IB finally called and said that NASDAQ had crossed some $2 stock with my order and that the trade was busted. With AMAT trading down $1.30 from where I originally sold, the stock was placed back in my account and I had to eat the loss. After several complaints to IB all they could tell me was that it was not their fault. When dealing with live brokers these problems will almost always be taken care of by an error account, when trading online these types of errors will most likely be the responsibility of the client. The most frustrating thing about these types of errors is that it is impossible to hedge yourself because you have no way of knowing what your position is.
It hasn't happened very often, and I think outages will be fewer as online brokers and exchanges start adding more and more layers of redundancy. I like having two brokers just in case I need to offset a position in the event of an outage. Also, as a precaution I recommend that you are always prepared to enter an option order if needed. If the particular underlying you are trading has a thin option liquidity, you can pick a correlated option (like OEX if you are trading ES). If worse comes to worse and you have no way of offsetting your position and you want a hedge, buy the appropriate option. You won't lose that much for a day's worth of premium, mostly just commissions and some slippage. If you lost money and it was clearly the broker's fault, the good brokers will reimburse you if you talk to the right person. This is one of the arguments for paying a little more in commissions for a broker with good customer service.