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Oil crash busted broker’s computers and inflicted big losses

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Re: Oil crash busted broker’s computers and inflicted big losses

#111

Post by centimeter »

0x8BADF00D wrote: post #100
centimeter wrote: post #88

Earlier quoted context omitted.

From what I've seen, almost all financial companies developed a bunch of systems for different security types (which all have different rules and edge cases) independently, and only tried to tie them together as time went on. It's a recipe for a lot of confusion and inconsistency. There are tons of opportunities in finance to make short-sighted proclamations like "the number of futures in this kind of contract is alw…

Kind of orthogonal, but I’ve often faced pushback from Product Managers when trying to future proof a feature that I’m going to ship. The pushback is usually “oh, there’s no way our customers will ever need that!”. Only until many years later will it blow up in your face, with costly consequences.

I have had similar experiences. Even if the future-proofing is very inexpensive, they'd rather waste more work un-doing the future-proofing than the total amount of work that went into it in the first place, because it's "unnecessary".

Re: Oil crash busted broker’s computers and inflicted big losses

#112

Post by analyticstime »

adrr wrote: post #69
AndrewBissell wrote: post #2

Incorrectly assuming values can never be negative is an all-too-common occurrence in trading and financial software. In 2012 Swedish stock futures trading was suspended for a time because their matching engine used an unsigned type for order quantities and someone submitted an order with a negative value which wrapped around to 4 billion: https://www.reuters.com/article/markets-sweden-bug/swedish-s... Interactive Bro…

I'm going to guess there's two teams involved on the IB side of things. There's financial engine team which processes and handles trades. And there is the UI team that displays the data and allows people to create trades. I bet the engine handled these fine and issue was that the UI team had data validation checks to prevent negative values.

Nope. It was not possible to trade at negative.

Re: Oil crash busted broker’s computers and inflicted big losses

#113

Post by tramtrist »

andy_wrote wrote: post #104
haltingproblem wrote: post #98

Earlier quoted context omitted.

Sorry but this is terrible advice. If trading Oil Futures is akin to playing Russian Roulette then trading Oil ETFs is akin to juggling live hand grenades. One will go off as soon as you stop! Most commodity and leveraged ETFs are designed to benefit just one party - the designer of the ETF. There are plenty of articles on USO and its travails.

I'm not recommending USO or oil itself as an investment, and I agree that you will be paying money to the ETF manager if you get involved in it. But I don't agree that USO is _more_ dangerous for a casual trader to trade than oil futures, for the reasons I mentioned. Removing the overall fluctuations of the oil market, the relative problem with ETFs is that they bleed away value over time. That's a real issue, but I…

I owned USO and sold it on 4/21. I lost money of course. It seems USO could never go negative according to what you said and I could only go to 0 but I learned my lesson to stay out of futures for good

Re: Oil crash busted broker’s computers and inflicted big losses

#114

Post by wpietri »

ashtonkem wrote: post #108
wpietri wrote: post #61

Earlier quoted context omitted.

It's a good question. Most markets have (or at least used to; I've been out of this a long time) a special class of speculator called a market-maker; they get discounted fees in exchange for providing liquidity. That way a seller doesn't have to wait around for a buyer. Speculators in theory also provide liquidity, and in theory also contribute to keeping the prices "correct" (meaning at levels that reflect what's kn…

Minor nit: market makers typically aren’t there to speculate, they’re there to provide liquidity and make small profits per trade doing so. Most market makers try their best to trade down to no position overnight, since they don’t want to be long or short in anything.

Thanks! Maybe the market maker I worked for was atypical. We definitely had opinions on where the market was going and made good money from that, especially in times of high volatility.

Re: Oil crash busted broker’s computers and inflicted big losses

#115

Post by ajflores1604 »

hellofunk wrote: post #86
haltingproblem wrote: post #84

“Five days, including the weekend, with the coronavirus going on and a complex system where we have to make many changes, was not a sufficient amount of time,” he said. “The idea we could have bugs is not, in my mind, a surprise.” He also acknowledged the error in the margin model Interactive Brokers used that day.....We have called the CFTC and complained bitterly,” Peterffy said. “It appears the exchanges are going…

Agreed. IB's data is also not so accurate much of the time; the way it reports volume in particular is misleading. I've seen traders abandon IB after big losses because their strategies required actual live volume data that didn't suck, and nearly any other broker provides this.

What are some recommended alternative platforms that provide api access?

Re: Oil crash busted broker’s computers and inflicted big losses

#116

Post by stuzenz »

haltingproblem wrote: post #84

“Five days, including the weekend, with the coronavirus going on and a complex system where we have to make many changes, was not a sufficient amount of time,” he said. “The idea we could have bugs is not, in my mind, a surprise.” He also acknowledged the error in the margin model Interactive Brokers used that day.....We have called the CFTC and complained bitterly,” Peterffy said. “It appears the exchanges are going…

Thanks for the information. I have been using IB and their API and had always wondered about the quality of their code base. I assumed there was a lot of legacy with their systems - I just had little idea of how well they were managing things internally.

For my limited requirements, Interactive Brokers does seem to meet needs, but do you know of a platform that is highly regarded that is accessible for clients outside of the States?

Interactive Brokers seemed to tick a lot of boxes at the time when I chose them.

Re: Oil crash busted broker’s computers and inflicted big losses

#117

Post by kccqzy »

andy_wrote wrote: post #87
elliekelly wrote: post #9

> Peterffy said there’s a problem with how exchanges design their contracts because the trading dries up as they near expiration. The May oil futures contract -- the one that went negative -- expired the day after the historic plunge, so most of the market had moved to trading the June contract, which expires May 19 and currently trades around $24 a barrel. > “That’s how it’s possible for these contracts to go absolu…

There are ETFs that track oil futures (basically like a stock, but backed by oil instead of a company). It's been a while since I've looked at any of this, but I think USO is still the most prominent. There are plenty of things to watch out for with these ETFs. You pay ongoing expense fees. And ETFs, especially those that aren't just holding containers for assets, can have subtleties in their prospectuses that cause…

Definitely no. ETFs merely hide the fact that the underlying are futures contracts. ETFs make these futures contracts seem like stocks so any Tom Dick or Harry thinks they understand it and buys them. It's a very leaky abstraction.

> They can't go below 0

One month ago people know that futures can't go below 0. What guarantees ETFs will never go below zero? It's economically absurd to think an ETF holding negatively priced assets will still have positive value.

I would argue that if an investor isn't knowledgeable enough to trade an underlying, the investor shouldn't trade an ETF of these.

Re: Oil crash busted broker’s computers and inflicted big losses

#118

Post by aluminussoma »

wpietri wrote: post #76
sulam wrote: post #59

Earlier quoted context omitted.

Sounds apocryphal.

Could be! It was definitely a friend-of-a-friend territory. But often legends of failure are used to warn against real dangers. Little Red Riding Hood is surely fictional, but wolves in the woods definitely weren't. And at least in Chicago in the 1990s, traders and clerks could definitely be wild. During slow periods on the CME floor somebody would get a transparent trash bag, declare it a $20 bag, and then walk arou…

Also told on Page 34 of Ron Insana's Traders Tales: https://books.google.com/books?id=NyeVNsWvJHAC&pg=PA32&lpg=P...

Re: Oil crash busted broker’s computers and inflicted big losses

#119

Post by baking »

fhars wrote: post #105
wpietri wrote: post #55

Earlier quoted context omitted.

> It’s pretty well known that commodity futures contracts are a game of hot potato Very much so. I wrote software for financial traders in the 1990s, and I heard tell of a couple of clerks (in this context, sort of "trader intern") who thought they were smart enough to do a little commodity metal trading on the side. However, they didn't quite understand the details of contract expiration, and so supposedly they ende…

There is this old story in the same vein (and of course also [citation required]): https://thedailywtf.com/articles/special-delivery

Sorry, but this story is utter bullshit. Source is unreliable and the only link in the story is to the movie "Trading Places" and the maybe the "WTF Stock Exchange" might be a clue.

Re: Oil crash busted broker’s computers and inflicted big losses

#120

Post by ornornor »

haltingproblem wrote: post #84

“Five days, including the weekend, with the coronavirus going on and a complex system where we have to make many changes, was not a sufficient amount of time,” he said. “The idea we could have bugs is not, in my mind, a surprise.” He also acknowledged the error in the margin model Interactive Brokers used that day.....We have called the CFTC and complained bitterly,” Peterffy said. “It appears the exchanges are going…

> On another aside, I have known folks who have worked at IB in the past, and their systems absolutely suck dead goats. Huge masses of legacy C++ code with poor testing.

As a customer I’m not surprised at all. Their software is terrible, especially the simplified web application and their mobile app. Terrible. But their fees are incredibly low. You can convert a million dollar to other popular currencies for less than 20$ at interbank rates. Just nuts.

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