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Non-Tech : Interactive Brokers / Timberhill

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To: atto who wrote (2460)	1/18/2002 12:02:52 AM
From: Dan Duchardt	Read Replies (1) of 9012

atto, The only thing Globex could do is come out with new rules stating that no trades can be executed out of range determined by the current value of the underlying index. Other than that option I think what Globex did (not breaking up the trades) was correct. If they do ever break trades, it should always be based on previously published criteria. I'm not suggesting Globex should be doing anything to unwind the event, especially since I do not know what really caused it. But perhaps the notion of constraining trades to a range based on the index is not such a bad idea. After all, the exchanges quite arbitrarily prevent the market from moving down more than 5% in a day until after a ten minute period of time for re-evaluation. Why should it be permitted to move up an unlimited amount in a few seconds in response to what might have been a mistake, or a deliberate attempt by someone with very deep pockets to precipitate the anomaly and profit from it? It is not a question of blame. I see no fault with what IB did in handling orders as they have advertised they would. As for Globex, it is a man-made system that is intended to allow traders and investors to participate in the market and to profit or lose based on their ability to read the market in whatever time frame they choose to trade. Those who perceive the value of a contract to be higher than current value are enabled to purchase from those who perceive them to be of lower value. That is what a well designed trading system would do. It is not a slot machine to drop in money and hope that purely random events will happen to play out in your favor. To be sure, all of us who trade with this system are subject to inherent risks that we must accept, and if anything good has come from this event and this discussion it is the contributions from people who have pointed out some details of how the system is designed so we can all better understand those risks. However, accepting the risk does not mean we have to say it's OK that Globex obviously contains some flaws that amplify that risk. I accept my own loss to this event as part of the game. I don't expect anyone to give me back my money. I do not accept that the system has to be designed to operate in a manner that permits thousands of contracts to change hands at prices that are far removed from anyones perception of their fair value. Somebody at Globex should be analyzing this event in detail and trying to figure out a way to prevent such occurrences in the future. I've seen nothing to suggest any such effort is underway, and very few voices even willing to suggest that something is wrong. Dan

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