7 ms·

> By the time the trades were blocked for the last time, less than an hour after they began, Goldman Sachs executed orders to sell more than 1.5 million options

> By the time the trades were blocked for the last time, less than an hour after they began, Goldman Sachs executed orders to sell more than 1.5 million options contracts for $1. The cause? A coder had mistakenly programmed a router to send placeholder bids as live orders. If not for the good graces of the options exchanges, the bank would have lost $500 million, according to the U.S. Securities and Exchange Commission. Cancellations and price adjustments reduced that to $38 million. It sure does seem like there are two sets of rules on Wall Street. I doubt any small trader would be able to reduce their losses 90+% after errantly submitting a bunch of live options orders.

matte_black 9y ago
Sorry, but rules need to scale. What is acceptable for a small trader can not always be acceptable for a massive Corp.
- hueving 9y ago
  Your statement is backwards though. The massive corp is being granted much more leeway for acceptable behavior than that of a small trader.
  - wastedhours 9y ago
    Not so much leeways as "huge company has a massive amount of context to use as evidence this was out of the ordinary". A smaller trader has proportionally less history in the market to use as a evidence something is wrong and the rollback rules should apply.
    - Applejinx 9y ago
      You're not contradicting the objection, you're just outlining another mechanic by which it happens. "The New England Patriots reached ten Super Bowls, therefore the foot out of bounds just before scoring a touchdown was clearly a mistake and out of the ordinary. Therefore, award the Patriots the point, on the grounds that they usually don't make mistakes like that. And don't check the pressure in the football please, there have been ten Super Bowls where that wasn't apparently a problem…" (I wonder who I'm insulting more, the Pats or Goldman Sachs :D )
      - wastedhours 9y ago
        Loving the analogy :D but (and excuse my ignorance), but in NFL those rules don't allow that, where as it appears the markets do have these mechanisms to allow it?
        hueving 9y ago
        They do allow it, but that's precisely what people are complaining is unfair. They are literally too big to follow the same rules as the small traders.
- jfoutz 9y ago
  Yes, and that's a good scaling rule. the person with $50 dollars is likely clueless and stumbling around trying to figure out what the rules are. The person with $50 billion can do serious damage when they screw up. The rules in place are exactly backwards. the $50 dollar team is held to a high standard, with no affordances. the $50 billion dollar team is part of the club, so enforcers look the other way when they screw up.
  - enervate 9y ago
    but a $50 trade has a much smaller effect on everyone than a $50 billion trade
    - TheAlchemist 9y ago
      For instance, the effect was that Goldman lost money, while some other guys made money - what's the harm here ? Moreover, the trade being busted, the guy that initially made the money, probably found himself in a very uncomfortable position, since chances are he already covered his risk and hedged the lucky trades. So overall, he lost money just because Goldman was able to force the rules in their favor. Unfortunately, markets are rigged, just as most things -> the bigger you are, the more influence on the rules and how they are applied you have.
      - maxxxxx 9y ago
        If the little guy makes a mistake Goldman will happily take the money. If they make a mistake the rules need to be changed. This simply is not right.
  - matte_black 9y ago
    It is not backwards at all. Corporations are made up of a ton of people, there's no one person you can lay blame on. Some guy fucks up and costs a firm half a bil with a computer error, that's not something you want to just allow to happen. A dude losing $50? Give me a break, his risk is his own. Consider his $50 a small price to pay for learning how things work. And let me remind you, it is a very small price.
dnomad 9y ago
There are N^2 sets of rules. At the end of the day you have two counterparties engaged in voluntary exchange. Everything is negotiable, anything is possible -- you just have to ask or pay. What people don't seem to grasp about modern finance is how mind boggingly complex and dynamic it really is. The idea that a tier one investment bank and a small trader should be held to the same "rules" is so wondrously silly... it's hard to describe but there ought to be a word for it. The only thing really annoying here is that all this wackiness is backstopped by the Federal government. Nobody has any doubt that at the end of the day they will step in to save GS if everything really goes sideways. And that's probably a good thing. But it's very strange that the big banks, which are essentially quasi-state actors at this point, get to keep so much of their profits when the public is bearing so much of the risk. This is the real difference between China and America: in China the government does everything in its power to make sure its state-owned enterprises succeed and then it takes its pound of flesh. In America the government does everything in its power to make sure its state-owned enterprises succeed and then it gives them a huge tax cut to make the shareholders that much richer. It's a bold move, let's see how it plays out.
- matte_black 9y ago
  > it's hard to describe but there ought to be a word for it. The word is naive.
- chibg10 9y ago
  The Chinese government bailed out Anbang literally two days ago. https://www.ft.com/content/c5bca040-37c6-11e8-8b98-2f31af407cc8 https://www.ft.com/content/c5bca040-37c6-11e8-8b98-2f31af407...
  - bartart 9y ago
    At least the chairman is on trial. Not that the trial would be fair or is for the right reasons.
- feiofh398r39rty 9y ago
  >The idea that a tier one investment bank and a small trader should be held to the same "rules" is so wondrously silly... it's hard to describe but there ought to be a word for it. Just like the idea that the aristocracy should be accountable to the same laws as commoners, right?

matte_black 9y ago

Sorry, but rules need to scale. What is acceptable for a small trader can not always be acceptable for a massive Corp.

hueving 9y ago
Your statement is backwards though. The massive corp is being granted much more leeway for acceptable behavior than that of a small trader.
- wastedhours 9y ago
  Not so much leeways as "huge company has a massive amount of context to use as evidence this was out of the ordinary". A smaller trader has proportionally less history in the market to use as a evidence something is wrong and the rollback rules should apply.
  - Applejinx 9y ago
    You're not contradicting the objection, you're just outlining another mechanic by which it happens. "The New England Patriots reached ten Super Bowls, therefore the foot out of bounds just before scoring a touchdown was clearly a mistake and out of the ordinary. Therefore, award the Patriots the point, on the grounds that they usually don't make mistakes like that. And don't check the pressure in the football please, there have been ten Super Bowls where that wasn't apparently a problem…" (I wonder who I'm insulting more, the Pats or Goldman Sachs :D )
    - wastedhours 9y ago
      Loving the analogy :D but (and excuse my ignorance), but in NFL those rules don't allow that, where as it appears the markets do have these mechanisms to allow it?
      - hueving 9y ago
        They do allow it, but that's precisely what people are complaining is unfair. They are literally too big to follow the same rules as the small traders.
jfoutz 9y ago
Yes, and that's a good scaling rule. the person with $50 dollars is likely clueless and stumbling around trying to figure out what the rules are. The person with $50 billion can do serious damage when they screw up. The rules in place are exactly backwards. the $50 dollar team is held to a high standard, with no affordances. the $50 billion dollar team is part of the club, so enforcers look the other way when they screw up.
- enervate 9y ago
  but a $50 trade has a much smaller effect on everyone than a $50 billion trade
  - TheAlchemist 9y ago
    For instance, the effect was that Goldman lost money, while some other guys made money - what's the harm here ? Moreover, the trade being busted, the guy that initially made the money, probably found himself in a very uncomfortable position, since chances are he already covered his risk and hedged the lucky trades. So overall, he lost money just because Goldman was able to force the rules in their favor. Unfortunately, markets are rigged, just as most things -> the bigger you are, the more influence on the rules and how they are applied you have.
    - maxxxxx 9y ago
      If the little guy makes a mistake Goldman will happily take the money. If they make a mistake the rules need to be changed. This simply is not right.
- matte_black 9y ago
  It is not backwards at all. Corporations are made up of a ton of people, there's no one person you can lay blame on. Some guy fucks up and costs a firm half a bil with a computer error, that's not something you want to just allow to happen. A dude losing $50? Give me a break, his risk is his own. Consider his $50 a small price to pay for learning how things work. And let me remind you, it is a very small price.

dnomad 9y ago

There are N^2 sets of rules. At the end of the day you have two counterparties engaged in voluntary exchange. Everything is negotiable, anything is possible -- you just have to ask or pay. What people don't seem to grasp about modern finance is how mind boggingly complex and dynamic it really is. The idea that a tier one investment bank and a small trader should be held to the same "rules" is so wondrously silly... it's hard to describe but there ought to be a word for it. The only thing really annoying here is that all this wackiness is backstopped by the Federal government. Nobody has any doubt that at the end of the day they will step in to save GS if everything really goes sideways. And that's probably a good thing. But it's very strange that the big banks, which are essentially quasi-state actors at this point, get to keep so much of their profits when the public is bearing so much of the risk. This is the real difference between China and America: in China the government does everything in its power to make sure its state-owned enterprises succeed and then it takes its pound of flesh. In America the government does everything in its power to make sure its state-owned enterprises succeed and then it gives them a huge tax cut to make the shareholders that much richer. It's a bold move, let's see how it plays out.

matte_black 9y ago
> it's hard to describe but there ought to be a word for it. The word is naive.
chibg10 9y ago
The Chinese government bailed out Anbang literally two days ago. https://www.ft.com/content/c5bca040-37c6-11e8-8b98-2f31af407cc8 https://www.ft.com/content/c5bca040-37c6-11e8-8b98-2f31af407...
- bartart 9y ago
  At least the chairman is on trial. Not that the trial would be fair or is for the right reasons.
feiofh398r39rty 9y ago
>The idea that a tier one investment bank and a small trader should be held to the same "rules" is so wondrously silly... it's hard to describe but there ought to be a word for it. Just like the idea that the aristocracy should be accountable to the same laws as commoners, right?