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If anyone is not interested in this material please feel free to use
your delete key.
Since I have very little ability in Easy Language this is my attempt to
contibute to this list through my trading experience.
I appreciate the contributions to this list and I would like to post
this to help anyone who may have a dispute that they might consider
bringing to a CME's Arbitration panel.
This information may apply to other exchanges however I have no
experience with them.
On October 28,1997 I entered an order to sell 1 December sp 750 put at
16.00 or better.
14 minutes later after my order was entered a trade occured at a price
of 23.00 with a volume of 400 contracts.
1 hour and 24 minutes after my order was entered a trade occured at a
price of 20.00 with a volume of 52 contracts.
I contacted my order desk 3 times during the day but I was not able to
obtain the status of my order.
The following day I received a phone call telling me my order was
unable.
The settle price on October 28,1997 was 5.40.
I contacted the compliance dept. at my firm and I was told to draft a
letter and explain the details.
I drafted the leter on October 29,1997 and it was received the morning
of October 31,1997.
On November 4,1997 I exited the position at a price of 4.30.
I finally received a letter from my firm on November 14,1997. The firm
said that they tried to settle this but that they were unable to do so.
They provided my with the CME's phone number should I decide to take the
matter to arbitration.
In late November of 1997 I made my claim against the "unknown" floor
Broker as I didn't know who he was, for 14 SP points ( the difference
from the closing asking price of 6.00 vs. 20.00, the first bid above my
offer price, (12 minutes after my order was entered).
I also made a claim against the brokerage firm, but only for the
difference of 6.0 and 4.30. I felt that the brokerage firms SLOW
response to my inquiry caused me to delay my exiting of this postion.
Since my brokerage firm claimed that they received and sent my order to
the floor in an orderly and timely manner and since they claimed that
the floor broker was not their employee but was an independent floor
broker they asked that the claim against them be dropped.
That was my biggest mistake.
But since I WAS still trading with that brokerage firm I didn't want
this to affect my trading.
So I did in fact drop the claim against the Brokerage firm for their
delay.
On September 15,1998 I finally had a hearing at the CME. I flew to
Chicago to attend the hearing. Prior to this I discovered that The
Floor Broker was bringing legal conultation. I retained a Chicago
attorney to attend the hearing with me. He would not take the case on a
contingency basis because I had already filed the consent to arbitration
form. Early that morning I asked my attorney what my chances were. He
said that my chances were good except for the fact that he thought the
Arbitration panel at the CME was noted to be pro broker. That was his
biggest concern. His other concern was that October28,1997 was a very
busy day.
Attending the hearing within the first 2 or 3 minutes I had a sense that
I was going to lose. I was asked several times why I waited to exit the
trade 5 days later, and how long I waited to call to check on my fill,
and how many times I called that day. I as well as my attorney tried to
make it clear that my claim for damages were for that day only. On
October 28,1997, After a few hours the market had moved much lower. It
seemed to me that the questions were implying that I waited too long to
call to check on my order. That seemed very unfair to me.
I explained in detail answers to those questions. I was asked about a
dozen or so questions while I think the floor broker was asked at the
most 3 questions. That gave me a good indication as to how fairly
things were going. I would say that the chairman seemed to hold a fair
hearing. I can't say that I felt the same about the majority of the
panel members.
I was amazed that the floor broker acknowledged that he had 100,s of
orders that weren't filled that day. The poor chap would have had more
hearings than he could handle if everyone of them wanted to bring there
case to arbitration.
I contacted the CME today to learn that the panel had denied my claim
for damages. I can't say that I was surprised.
The purpose of this posting is not to complain about any person,firm,
offical or exchange. I would like to note a few of my errors to help
anyone who may choose to go through this process.
1. Choose a mixed panel if possible otherwise you will have a panel made
up of floor brokers or exchange members. You should ask yourself this
question. If I am filing a claim against a floor broker do I want floor
brokers on the panel? You will still have them on a mixed panel but I
don't think that they will make up the majority.
2. I would not sign the consent to arbitration form that is included
when you open a new account. This form should be optional.
3. If you should file a claim be sure to name the brokerage firm as well
as the floor broker. At my hearing the floor broker claimed that the
brokerage didn't give him the order in time. Since I didn't claim
against the brokerage firm it became a situation where I had to defend
the brokerage firm. If this ever happens again I will let the firm
defend themselves.
4. My attorney said that I made an error and that I should have file
with the CFTC. I'm not sure if he is correct about that but I would
suggest that consider that as an option. This may not be advisable
because of a greater expense but I think it might be a more fair
hearing.
5. Although you might feel more comfortable by bringing an attorney. I
would think if you are attending an arbitration hearing having someone
who has a good knowledge of the markets would be fine. An attorney in
this format would probably be overkill.
I should have made it know to my brokerage firm that I would close my
account if this matter was no resolved to my satisfaction. However,
since I was actively trading and since I was somewhat successful for
over 12 years of trading with that firm I didn't want to do that. I was
concerned that it would affect my trading. Needless to say that the
account is now closed. If I had to do it again I would have transfered
1/2 of the account to a new firm.
There is a light at the end of this dark tunnel. When I decided to
begin looking for a new broker I was told by a nice gentleman to give
his firm a try. He told me that the fills would be better. The
comission was higher at the new frim but I decided to give him a shot.
I compared the fills by having my assistant (who has approval to enter
orders on my behalf) enter identical orders at the same time I did. My
assistant entered the orders to my old brokerage frim and I entered them
to the new firm. In FEB. of 98, a period that included 28 trades in the
sp's, the new firm's fills were 6.30 points better or $1575.00.
Although the cost per trade were $7.00 higher, I was still $1200.00 to
the good.
Good trading and fills to all!
Tom
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