|
PureBytes Links
Trading Reference Links
|
Ira,
You have absolutely no idea as to the facts. In 1987 you could not have
orderly markets.
OEX closes when more than 20% of the market cap is not trading. In 1987
that meant if IBM was closed the OEX closed. The implied vol. in the SPX
options at the MERC was well above the implied vol. at CBOE. If you read
the article in the Chicago Tribune you reference to market quality at CBOE
versus the MERC. He came into the CME pit to cover with the market down
over 300 .... REFCO had allegedly, already taken control of the account as
they knew they owned the debit. Coming back in the next morning when the
whole pit had know ledge of the order, it's character and size. How would
you react if you tried to exit a trade and your broker had telegraphed your
intentions to everyone and the exchange allowed the trade to occur. The
markets were open and trading when they ran the vol. to over 60%. People
came into the pits with knowledge of size and character of a customer order
.. it was like shooting fish in a barrel. Everyone knew ...Everyone. When
they completed his execution the took almost 30 vol. points back out. He
was dry-cleaned.
I would not be surprised if the courts found in his favor. An exchange has
an obligation to provide fair and orderly markets or close. There were no
fair and orderly markets ... just a brief, violent execution. When he was
being filled you could sell 10 point spreads for 11 points at the prices
they filled him. Anyone who had any clue as to how to trade options on that
day found themselves unable to trade fast enough if they were trading CME
options.
Also if you want to quote the event of 1987 remember that the securities
exchanges
1. Adjusted trades and made restitution to customers as well as settling a
series of lawsuits for $10,000,000... the basis fore the lawsuits was the
lack of a fair and orderly market on 10/20.
Ira wrote:
> Look what happened in 87. They stopped trading in the OEX, when that
> reopened, they stopped trading in the S&P, then they stopped trading in
> the key stocks like IBM. there was no place to hide or to cover. No
> sooner did they reopen one, then they closed them again. The stock
> exchanges aren't saints either. When the blood flows, who do they look
> to save first? certainly not the public! Then government came and
> extended unlimited credit to guess who? once again, not the public. So
> the answer is when you go , go big so that the powers have to make you
> a partner, not a victim. If Vic had gone down for a Billion or two more
> then the funds had, there would have been a different solution. Ira
>
> THE DOCTOR wrote:
>
> > In spite of the fact that I work for an exchange .. it is
> > very difficult to defend the MERC on this one. He was
> > screwed. The early closing on the day the market declined
> > 500 occurred while his orders were already in the pit. His
> > broker(Refco)was going through a panicked liquidation and
> > telegraphed their intent to the entire community. By the
> > time the market reopened the next morning(at a 60% implied
> > vol)he was DOA before trading even started. In the
> > securities industry, the kind of practices that are
> > commonplace in the futures industry, would be felonies.
> >
> > Refco was, alleged, very sloppy. The only one in the
> > Chicago marketplace who didn't know what was being traded,
> > how much and anxious they were to exit would have to have
> > been someone deaf, dumb and blind. I wonder how any of us
> > would fell if we had a large short person and he whole world
> > knew we were coming to cover. Vic was one of the better
> > traders and he was _ucked royal.....sorry about the
> > expletive. Lots of individual investor who traded on those
> > two days were also hurt by the action and there were lots of
> > trade adjustments made.
> >
> > If there is a condemnation to be made, IMHO, don't close the
> > markets prematurely ... let the marketplace work.
|