Tag Archives: us options exchanges

Options Exchanges Prepare For Worst Cases; “Algos Gone Wild”

NEW YORK (Reuters) – A year after Goldman Sachs <gs.n> bungled a software upgrade and lost tens of millions of dollars from unintended trades, the 12 U.S. stock options exchanges have crafted new rules for dealing with erroneous transactions, according to draft documents seen by Reuters.

Under the proposed rules, unintended trades placed by professional traders will usually have their prices adjusted to levels as close to their fair market value as possible, while wrong trades by retail customers will be mainly be undone, five sources with knowledge of the matter told Reuters.

The rules are meant to protect investors from algorithms gone wild and other sources of market turmoil. Regulators and exchange operators across equities, commodities and other markets have been taking steps to prevent mistaken trades from spiraling into collapses, a rising concern as trading grows increasingly automated.

Read more: http://www.businessinsider.com/r-exclusive-us-options-exchanges-craft-rules-to-fend-off-turmoil-2014-8#ixzz3Bof6Z9Ce