[dos1]

I have a hard time drumming up sympathy for these guys. They're mad because they couldn't make a quick buck. Isn't a hedge fund just gambling? It's high time Wall St. learns that it's never a good idea to put more in the pot than you can lose.

The part that is most striking to me is that share price and a company's intrinsic value are seemingly in different galaxies. This guy is talking about decisions based on hype. I'm floored. Do these guys really trade based on public opinion?

[veyron]

He is complaining because he was sandbagged. He didnt know what his position was, and NASDAQ and MS both dropped the ball here.

You can vilify hedge funds till kingdom come, but it sounds here that this guy played by the rules and lost due to a circumstance that he didn't believe was fair.

If the opposite happened (price spiked) yet the same technology problems happened, you'd have a bunch of people complaining that they were over or under filled.

The complaints would not be justified if there was no confusion on his position.

[minimax]

What gets me is how mysterious it sounds, when there is a ton of obvious troubleshooting that should have happened... and probably did but I can't find reported anywhere.

Hedge fund places order. NASDAQ returns an order id.

Did that order show up in the market data feed?

Did they see that order get hit on the market data side?

Did they get an order accept?

Did they try to cancel?

What happened when they tried to cancel?

What actually happened? Did the orders really just get accepted and then go into a black hole?

[joezydeco]

Black hole sounds about right. Apparently NASDAQ's systems went completely quiet for 17 seconds centered around the 11:30am open of Facebook:

http://www.nanex.net/aqck/3122.html

[pbhjpbhj]

Looks crooked as anything.

[joezydeco]

Do you think NASDAQ shut their computers down? Were automated traders crippling the system? Perhaps something else?

[AznHisoka]

Problem is there's no rules. Noone got in any legal trouble over at NASDAQ. People do insider trading without getting caught. It's a rigged game.

[marshray]

I'd say former Nasdaq chairman Madoff got himself in a little legal trouble, though perhaps that was after he left Nasdaq.

[jyrkesh]

Except that it's their rules that they're following, and with HFT those rules are generally rigged to help out the big guys. In fact, I'd be willing to bet that the system wouldn't have actually crashed if there weren't a bunch of Morgan Stanleys and the like trying to make a quick buck on day one.

[sp332]

You go to Vegas and put $5,000 on the roulette wheel and it breaks, it's like, hold on, I'm not going to do that.

I like this analogy. You want to play the market, fine. But if NASDAQ breaks, is that really part of the game?

[zackzackzack]

If they signed a legally binding agreement, then I imagine NASDAQ breaking would be part of the game.

[veyron]

The contracts absolve NASDAQ of liability in calamities of this nature (my business was almost destroyed -- had to take a 250K loss -- thanks to an order entry server failure), but it doesn't make you feel better.

Having had something similar happen to me, I know how much it sucks. You accept its a possibility, but don't really believe it will happen until it does.

[bbrtyth]

But then why do exchanges feel free to reverse trades after the flash crash, but not after something like this flash freeze? From a non-trader's perspective it's as if they do whatever they like.

[luriel]

It might look like they do whatever they like because pretty much they do whatever they like.

[TimGebhardt]

If you're a small fry then your broker will probably assume the risk. If you're a big guy, like it sounds like this guy is, then he should know he assumes the risk. Buying and selling in a market carries some credit/counterparty risk. NASDAQ probably handled this poorly (Seriously, did they ask traders to be honest and self-report their trade executions as part of the official books of record?!?!), but this guy's fund will be on the hook until it all gets settled out if it does at all.

EBay's an open market with buyers and sellers and people just take it for granted they'll get screwed by EBay/PayPal at some point in their lives. I understand that there is probably more at stake in the NASDAQ than on EBay, but their Risk/Compliance department should have advised the principles of his fund to hold some capital off to the side for a situation like this.

[sp332]

It depends on the agreement, and whether the NASDAQ guys could reasonably have known there was going to be trouble. I'm pretty sure that agreement only covers unforeseen problems, so if they knew something was funky, they might be liable for a lot more than $3MM.

[philwelch]

In fact, if an actual casino fucked up due to technical glitches, I think legally it's on them to fix it.

[mcherm]

Nope.Vegas law says casinos are not liable for technical errors. There have been cases of slot machines setting off the giant "You Win Millions" buzzer but not getting it.

[sp332]

But if the roulette wheel is broken so that the ball occasionally flies off, and the casino just says "ok, everyone loses" I don't think that would stand.

[mcherm]

True. But in this analogy, I hardly think you can claim "everyone loses".

[Spoom]

I'm curious; what's to prevent a casino from saying that prizes were actually technical errors whenever it was convenient to them?

[joezydeco]

If the casino believes that the machine has been corrupted or is broken, they call in the state's gaming commission which is supposed to act as an independent technical 3rd party. The machine is inspected and it's code compared to a known registered checksum.

Casinos can say "technical error!", but there is an advocate for the player in this situation. Usually. (Avoid Indian casinos in the USA for this reason).

[hef19898]

Yeah, these guys are funny. One day they agressivly take over companies. And the other day, as it happened with VW stock in Germany, the sue others when their gambles don't work.

What I remeber from the VW stock story happened back then was the following. Porsche tried to take over VW, so they bought every stock they could. Hedge funds bet on falling values and sold VW stock short. Since Porsche continued buying, stock prices raised. Then the hedge funds had to buy the stock short selled, values raised further (up to 1k € if I remeber well). The result were funds obliged to buy stock for almost 1K they sold earlier for a fracture of that.

And after that they sued Porsche for stock manipulation. Yes, these guys are funny. And yes, that FBs IPO stumbled over a computer system is ironic!

[brazzy]

VM was a very special case, since most free floating stock is non-voting (I think this has since changed); at that time only about 6% of the voting stock was free floating.

[seanalltogether]

> Do these guys really trade based on public opinion?

What is the stock market if not a giant popularity contest? Real investors make deals with companies, stock buyers are just hoping to catch the right wave.

[elorant]

What did you really think, that those guys are magicians who can trace trends and predict the future? Some may be but the vast majority isn't. The whole notion of markets is largely based on psychology.