They need to fire the employees who thought investing in Facebook was a good idea in the first place.
they were client orders. their clients wanted to buy FB
UBS sues Nasdaq over $357 million IPO loss
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Re: UBS sues Nasdaq over $357 million IPO loss
#32They need to fire the employees who thought investing in Facebook was a good idea in the first place.
they were client orders. their clients wanted to buy FB
Yep "including clients of our wealth management businesses."
The people running the UBS wealth management business need to be terminated. This is most likely the catalyst for why UBS is actually suing. Rest of the "clients" who did no research and just bought into the hype are just along in the lawsuit for the ride.
Re: UBS sues Nasdaq over $357 million IPO loss
#33Earlier quoted context omitted.
There were severe technical problems in Nasdaq's trading system during the IPO: http://abcnews.go.com/blogs/business/2012/06/nasdaq-outlines...
Aren't these sort of things covered in 'I have read and understood the Term and conditions' & then click on 'I agree'.
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Re: UBS sues Nasdaq over $357 million IPO loss
#34Earlier quoted context omitted.
The order workflow is generally like so: 1) Client sends order to market. 2) Market acknowledges it has received the order, sending back the market-generated order ID. 3) The market tries to fill the order (takes from 1ms to a day, depending on the type of order). When the order is filled, the client is informed. 4) At any time before the order is filled, the client can cancel it. Perhaps during NASDAQ's issues the a…
The real problem, according to UBS, is that in absence of an acknowledgement they sent extra orders. UBS improperly acted. The first rule when you set up risk limits is to consider both actual position (acknowledged) and theoretical position (assuming all orders are filled). Standard risk controls would have prevented this.
How long do you wait before realizing that the system did not get your request? If you want to own some FB stock, and your request is not acknowledged, the obvious thing to do is send another request.
Re: UBS sues Nasdaq over $357 million IPO loss
#35Earlier quoted context omitted.
The order workflow is generally like so: 1) Client sends order to market. 2) Market acknowledges it has received the order, sending back the market-generated order ID. 3) The market tries to fill the order (takes from 1ms to a day, depending on the type of order). When the order is filled, the client is informed. 4) At any time before the order is filled, the client can cancel it. Perhaps during NASDAQ's issues the a…
The real problem, according to UBS, is that in absence of an acknowledgement they sent extra orders. UBS improperly acted. The first rule when you set up risk limits is to consider both actual position (acknowledged) and theoretical position (assuming all orders are filled). Standard risk controls would have prevented this.
Yeah this seems like a baseless claim to me. I work on these kinds of applications and we always assume that an order is eligible to execute from when it's sent until the exchange confirms it has been canceled/deleted. This is pretty standard and it's surprising that a big bank would have such an obvious hole in their risk system, and disappointing that they would then fail to take responsibility for their own mistake.
Re: UBS sues Nasdaq over $357 million IPO loss
#36Earlier quoted context omitted.
The real problem, according to UBS, is that in absence of an acknowledgement they sent extra orders. UBS improperly acted. The first rule when you set up risk limits is to consider both actual position (acknowledged) and theoretical position (assuming all orders are filled). Standard risk controls would have prevented this.
Yeah this seems like a baseless claim to me. I work on these kinds of applications and we always assume that an order is eligible to execute from when it's sent until the exchange confirms it has been canceled/deleted. This is pretty standard and it's surprising that a big bank would have such an obvious hole in their risk system, and disappointing that they would then fail to take responsibility for their own mistak…
I think the standard IPO buying strategy for a large institution like UBS is to make many large buy requests to make absolutely sure that all the brokers that want stock get it, then cancel when enough orders are fulfilled.
Since interest was very high on the FB IPO, the assumption would be that it would be fairly hard to actually get stock. So the bank would make a lot of requests, on the hope that a certain percentage would be fulfilled immediately(say 30-40%), after which they could cancel the remaining orders.
Unfortunately, this turned out not to be the case, because a LOT of FB stock was released to the market. Add to that that NASDAQ(as UBS contends) did not give a confirmation ID to UBS, and it's pretty easy to see why this happened.
Re: UBS sues Nasdaq over $357 million IPO loss
#37Earlier quoted context omitted.
The real problem, according to UBS, is that in absence of an acknowledgement they sent extra orders. UBS improperly acted. The first rule when you set up risk limits is to consider both actual position (acknowledged) and theoretical position (assuming all orders are filled). Standard risk controls would have prevented this.
How long do you wait before realizing that the system did not get your request? If you want to own some FB stock, and your request is not acknowledged, the obvious thing to do is send another request.
It's better to miss an opportunity than potentially expose yourself to a loss. If the exchange side system has become obviously unreliable (not responding to requests would count here), it's generally wise to stop trading.
I can see the temptation to just forge ahead on a one time only event like an IPO, but if you do so then I think you need to be prepared for the consequences. I also imagine that part of the usage terms for direct access include something that limit Nasdaq's liability in the event of a system error, so I'm not sure how UBS thinks they will get around that.
Re: UBS sues Nasdaq over $357 million IPO loss
#38What they should actually do is fire the bozos handling client orders in their wealth management group.
Having built multiple systems for automated trading and traded manually, it's really trading systems 101 to know that unacknowledged orders should be treated as live until you know otherwise and should never be repeated. Second, when you connect to Nasdaq via FIX or their proprietary protocol, one of the parameters you are allowed to specify is and ACK timeout. So if the exchange was getting around to acknowledging an order with a client timestamp that is more than ACK timeout old it is auto-cancelled. It seems from talking to multiple people that multiple firms including UBS hadn't set an ack timeout at all.
Re: UBS sues Nasdaq over $357 million IPO loss
#39What they should actually do is fire the bozos handling client orders in their wealth management group. Having built multiple systems for automated trading and traded manually, it's really trading systems 101 to know that unacknowledged orders should be treated as live until you know otherwise and should never be repeated. Second, when you connect to Nasdaq via FIX or their proprietary protocol, one of the parameters…
Oh and that will get 357 million back?
Re: UBS sues Nasdaq over $357 million IPO loss
#40Earlier quoted context omitted.
they were client orders. their clients wanted to buy FB
Yep "including clients of our wealth management businesses." The people running the UBS wealth management business need to be terminated. This is most likely the catalyst for why UBS is actually suing. Rest of the "clients" who did no research and just bought into the hype are just along in the lawsuit for the ride.
>> This is most likely the catalyst for why UBS is actually suing
unlikely. from their quarterly report " NASDAQ ultimately filled all of these orders, exposing UBS to far more shares than our clients had ordered".
their clients ordered X shares of FB. UBS sent out 5 * X shares (or something like that). they sent out extra orders because NASDAQ wasn't sending acknowledgements for the initial orders. so UBS had to liquidate 4 * X shares at a loss, because the price took a dive. the loss from liquidation is why they sued.