Wednesday, August 21, 2013

The uneven playing field

How many 'busted' trades? They don't know!

It seems like they should, but it's not surprising that they don't.
Many of the trades that Goldman Sachs erroneously placed through the New York Stock Exchange, the CBOE and Nasdaq have been or are in the process of being cancelled by the exchanges.
I'm pretty sure that if I made a bad trade then just told these folks that it was all just a big mistake, I'd just be out of luck.  After all, if I go bankrupt, it won't cause a financial meltdown.  But I think I deserve the same consideration as Goldman Sachs (GS) does.
It seems odd, to say the least, that this kind of information is unavailable. It means that we can't answer some basic questions about the frequency and fairness of trade cancellation.

The fairness question is important. Smaller market players are very suspicious that big traders-Wall Street banks and larger hedge funds-are granted cancellations regularly, while others just get ignored. One trader told me he had tried to have trades cancelled a few times but never received satisfaction.
So, I guess I'm not alone.
"Anyone but Goldman would have just had to eat the loss," another trader said.
Well, I suspect there may be a few other select players that get special treatment.  The market is rigged, end of story.  The best a small investor can do is to avoid making the same mistakes that the big traders can make and get away with, and to be aware that the playing field is, in fact, uneven.

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