

The Trades of a Lifetime in 20 Minutes - jfi
http://www.nytimes.com/2010/05/08/business/08cancel.html

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dkasper
Actually the people who bought at .01 got screwed; when the buy at .01 gets
cancelled then you are suddenly in a short position if you've already sold the
shares, and you'll have to cover.

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joezydeco
...if you held the shares past the 20 minute cancellation window, right?

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DavidSJ
Quite the opposite. If you did _not_ hold the shares past that window, then
you'll end up in a short position.

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joezydeco
Okay, I'm missing something. I buy at 0.01, then sell at 40.00 during the
window. My buy _and_ sell transactions _both_ get cancelled, so how am I out
anything?

I can see the guy on the other end of the sell transaction getting screwed,
but what happens to me? I can see what you mean if I bought at 0.01 to cover a
short, but I'm looking at a simple position.

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DavidSJ
Oops, you're right.

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kbrower
60% seems pretty arbitrary. Any idea where this number comes from?

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waffenklang
maybe there were a limit order from nyse high graded manager at 59% of the
last trade of one of the stocks and he likes to don't have to work again for
the next couple of years.

But this demonstrates well the advantages of options and other instruments
that were not traded on an exchange. Even just for hedging sometimes there are
more profitable than the lowest limit order.

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borism
that's pretty ridiculous conspiracy theory!

here's more knowledgeable answer:

<http://www.cnbc.com/id/37019184>

 _As near as I can tell from talking to market participants, there is no rule
on this. This appears to be a compromise reached among the electronic markets.

But why 60 percent? Why not, say, 40 percent, or 30 percent? Not clear, but
one obvious answer is that there are a lot fewer trades that need to be busted
when it's at 60 percent versus say, 40 percent. This saves a lot of grief._

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some1else
An article full of children's words: 'Lost', 'Won', 'Players', 'Game', ..

Nobody will ever convince me that everything is alright with this type of
trading, where lottery-style winnings are praised. It's not even about being a
shareholder in a company you identify with, it's just about gambling at high
stakes. It just shouldn't be this easy to make or lose money. It's the same
disregard of reality that caused the investment banks to tumble.

How will we ever get back to sane investments with good intent for the
businesses in question?

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borism
well. what do you propose?

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derefr
The easiest way to eliminate HFT in particular would be to quantize the
trading day, so that trades don't occur "when they occur," but rather are
rounded to some integer-valued timestep. It seems to me, though, that most of
the problem with the stock market is in its secondary products—indeces,
futures, etc.—and that the simplest thing to do would be to ban the sale or
creation of any tradable commodities linked to a stock's value.

~~~
borism
_the simplest thing to do would be to ban the sale or creation of any tradable
commodities linked to a stock's value_

this sentence doesn't make any sense to me

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derefr
It means "ban index funds, stock futures markets, hedge funds, and every other
imaginable thing that is basically a service provided by a proxy who buys a
set of stocks and then gives you money if they do certain things." Stocks
themselves represent interest in the company's financial welfare; these other
things are abstractions, and the people who buy them are too many steps away
from the actual company to care what it does, even though, by purchasing those
abstractions, they are indirectly affecting those companies.

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csmeder
And what about the people who lost a lifetime of money in 20 minutes?

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ph0rque
They got most of it back in the next 40 minutes.

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rdtsc
Not if they had set stop-loss triggers to protect against a large loss. That
works well for a slow falling stock, but it doesn't work for a plunging stock.
The stop-loss for Accenture might have been $15, but by the time the market
order sale was executed, it could have gotten down to $1. Unless the stop-loss
was immediately followed by a limit order, all the value stored in that stock
would have been wiped out.

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Qz
...and that trade would be canceled.

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Keyframe
if movement was larger than 60%, which in most cases it wasn't.

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Qz
The example specifically referenced stocks going down to $1 from $15, so my
statement holds true for what it was in response to.

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Keyframe
True, and I'm sorry, it wasn't my intention to dispute that. However, NASDAQ
cancelled trades number is 286... 286.

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tomjen3
I can't wait for the law suits over this, at lot of money has been lost and it
is (assuming no faul play on the parts of investers) clearly because of the
exchanges.

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WarDekar
Whatever money was 'lost' was also 'found'/gained/(won since this is
gambling), and the people that make the rules are the ones that won, so...

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WarDekar
Why am I getting down-voted? Institutional traders cleaned up because of this,
the people that got screwed are the ones without the power to effect any
changes to the system. The only way there would be (successful) lawsuits is if
the situation were reversed.

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lrm242
Because your statement stinks of misunderstanding and lack of knowledge about
how the markets function. It's anti-market populism looking for reinforcement.
If you have some data or evidence that institutional players reaped great
reward because they have undue influence I'd love to see it.

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WarDekar
Well considering even the people with access to all the data on what happened
still don't know exactly what went down, it'd be a little tough for me to
prove anything. What we _do_ know is the only people that were able to make
trades were the institutional investors with access to the best (and fastest)
tools, HFTs are designed to skim fractions of %s off trades and thus since
there was a ton of volatility they would've cleaned up, and really- how could
anyone have won but the big boys here? The real losers here that got screwed
are ones that couldn't adjust their positions and had stop losses, or people
that tried to but were ill-equipped, etc. The institutional investors were
(most likely) on top of this, and able to reap the benefits- your Average Joe
investor was not, and neither was your grandpa's pension fund. I may not be
able to provide proof, but that's because no one (to this point, that we know
of) can provide any proof either way.

I'm not anti-market, I'm pro free-market, and unfortunately what we have is
not a free-market. Oh, and I'll get back to you with that data and evidence
once the SEC hands it over to me.

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lrm242
First, You can believe anything you want, but I'm surprised you're making such
claims since even you admit you have no data to back them up.

Second, All "high frequency traders" are not the same. In fact, using the term
doesn't really mean anything apart from some time oriented description of
trading. Some will profit from volatility, others won't. In fact, Tradebot has
already said they stopped trading for the day because of losses.

You're assumptions about "Average Joe Investor" and institutional investors
are quaint. That's about it.

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imajes
Actually, just to clarify, all the transactions in the 'fail window' are going
to be cancelled.

no-one makes anything.

