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Dear Keith & Group,
I discussed the matter of fills, limit orders, the so-called "one tick
rule", etc. several years ago with a Compliance Officer at one of the
exchanges, either the CME or the CBOT, I don't recall which ---
specifically, whether there was any rule or guideline vis-a-vis getting a
fill in your situation. In other words, if the market traded one tick over
my sell limit or one tick under my buy limit, was I guaranteed a fill? He
said that although many people thought that such a rule existed, it does
not; furthermore, the only relevant rule is that a broker is required to
make his best efforts to fill an order, and his best efforts are to be
determined in light of all the facts and circumstances. So, he said, if
time and sales shows that the market did tick one tick under a buy limit
order, but did so only on one or few contracts, it would be unlikely that
the broker would be able to fill the limit order in question, especially if
it were for multiple contracts, and as a consequence, the broker could not
be held to executing the order. In addition, you may be aware that
especially during fast markets, different prices will be trading
simultaneously in different areas of a pit --- in that situation, it is
hardly fair to hold a broker at one site to a price that trades on the other
side of the pit.
I regret for both our sakes the absence of any "one tick rule." Such a rule
would indeed make trading easier, more clear, and less anxiety producing.
Nevertheless, the situation you mention, while unfortunate, occurs
frequently, is consistent with exchange rules, and is not necessarily
indicative of misbehavior either in the pit or by your broker. Trading in
the pit is a chaotic process, performed buy humans not machines, and the
exchanges' "best efforts" rule is really the best that they can do ---
otherwise, who'd accept the liability of filling your orders if they knew
the job came with a guarantee?
Sincerely,
Richard
Keith wrote:
> It seems that this company or exchange has some messed up rules.
>
> @ 2:49 est. I am filled for S&P short @ 1381.40.
> Next, I place a buy @ 1379.60 limit. It trades @ 1379.50 1 time @
> 2:53:54.
> I am NOT filled. My broker says "it only traded there 1 time, nothing I
> can do. Now, if it traded there 3, 4, or 5 times you would have a
> legitimate gripe." He tells me "Timberhill can only do the best they
> can to make a fill and that when it's trading a half wide like it was,
> that there can be no guarantee." He says "most or a lot of brokers will
> guarantee it but that's the price you pay to trade with Timberhill."
>
> This industry seems so fraudulent!!
> Keith
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