4 ms·

Then the exchange breaks the 0.5x trade Yeah, this can't be overemphasized. When some widow or orphan (or more likely GS) is on the other side of the trade, th

Then the exchange breaks the 0.5x trade Yeah, this can't be overemphasized. When some widow or orphan (or more likely GS) is on the other side of the trade, then clearly it should be broken. Wouldn't want them to lose any money. /sarcasm As you say, the rational action is not to play. Other people have opined on this and said that, if the "clearly erroneous" rules are properly defined, then a trade should never never never be broken. It should simply not be allowed to go thru. That makes more sense to me. Edit: And for those who think this is merely hypothetical, or just whinging, you should read this: http://www.ft.com/cms/s/0/37fff9c6-0b36-11e3-bffc-00144feabdc0.html http://www.ft.com/cms/s/0/37fff9c6-0b36-11e3-bffc-00144feabd... GS trades were broken. Hopefully the FT paywall won't block that link, it worked for me when I searched for the story. So who knows.

lotharbot 11y ago
> "the rational action is not to play" The rational action is not to attempt a short-term play. Having one side of your two-sided trade broken is a very bad outcome. But if you're making a long-term play, that consideration is irrelevant. There's no "other side" of the trade for you to match up with. If you get an asset at 0.5X and then don't sell it and then the exchange breaks the trade, you get your money back and you're no worse off than when you started. But if you happen to grab an asset at 0.5X and the exchange doesn't break the trade, then you gained an asset for half of what it's worth. Now you've got a great asset in your portfolio, only you have twice as much as you should have been able to afford. That's a great move!