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reason why most people lose in arbitrating a price discrepancy is because there is a rule that requires a customer to mitigate damages. This means that if your broker failed to sell for you at three-quarters, your only damages would be for the next incremental price movement of a quarter because of your duty to mitigate damages. Accordingly, your actual damages may be a quarter of a point, or $250. The industry knows that no sane person is going to hire an attorney and commence an arbitration for $250. |
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The market makers have tried to enforce every available rule against DAET traders. For example, there is an obvious error rule in the industry. If the bid price is 10 and you have erroneously offered to buy at 100 due to a keypunch error, this is an obvious error and the trade will be scratched by agreement of the parties or through NASD intervention. |
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I had an obvious error in a trade in which the contra party was the trading desk at my own clearinghouse. The trading desk is a separate department from its clearing department. I was on the wrong side of an obvious error, and yet the trader refused to break the trade. He disliked us so he wanted us to suffer the pain of an unnecessary NASD procedure. I called the president of the firm about this discourtesy. The president corrected the problem with a phone call to the trader in a conversation that could have been a career-altering event for the trader. |
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This event is illustrative of the market-maker mind-set and the manner in which the market makers seemed to seize every opportunity to harrass SOES firms. Even if the SOES firm was correct, the market makers forced the issue and arbitrated whenever possible. They just wanted to make it more difficult for the SOES firms by compelling us to waste time and legal fees in useless endeavors. Pushing SOES firms to arbitration was indicative of the industry attitude that the DAET/SOES traders deserved all of the difficulties the market makers could |
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