I had a market sell order that went through last Friday morning, 06/05/2020 at 11 am.

It has an Order Id, Security ID, and CUSIP ID.

Today the broker removed it from my account and took the money back because they said the market price was out of range for what the stock was trading for.

Are they allowed to take the money back? Shouldn't the broker, exchange or whoever put that buy order in be liable?

I must have made over one hundred trades after that sale, including with the proceeds from it. It's mind boggling how they are reconciling this new account balance I have. I am unable to.

  • 1
    Does you broker offer you Time & Sales? If so, you can verify if the price discrepancy is valid. And yes, brokers can cancel erroneous trades. – Bob Baerker Jun 8 '20 at 21:40
  • @BobBaerker Thank you, but it says they have to file the claim within an hour, which they didn't. They never notified me either. The security is traded on NASDAQ: nasdaqtrader.com/Trader.aspx?id=ClearlyErroneous – Louis Waweru Jun 8 '20 at 21:47
  • And the broker is? (Robinhood perhaps?) – Bob Baerker Jun 8 '20 at 21:48
  • It's my beloved Charles Schwab unfortunately. I hold them so highly. – Louis Waweru Jun 8 '20 at 21:49
  • Surprised that it's Schwab. They've been to the rodeo for a long time. I'm not going to bad mouth them but they weren't really designed for traders. – Bob Baerker Jun 8 '20 at 21:51

Most exchanges have rules that allow trades to be price adjusted or busted under certain but narrow circumstances.

Often these are categorized as obvious errors or clearly erroneous, or catastrophic errors. The exchange rulebook sets out the procedure and criteria.

For example on NASDAQ (Equities) the process is set out in their Rulebook under Rule 11890.

These occur when the person on the other side of the trade claims that the trade was clearly erroneous or an obvious error, and they submit a request for review to the exchange within the time window - usually within 30 minutes. The exchange then reviews the trade and makes a determination on whether the trade is to be busted or price adjusted. It is very rare for the process to take more than a day. The price criteria are quite extreme, so it has to be a big price jump.

Usually trades against customers will be busted while trades against non-customers will be price adjusted.

When a bust is determined by the exchange, both parties have their trades canceled and the money is returned as though the trade never happened. The bust should be reflected in the time and sales data.

Typically market participants are notified that the trades are under review and later on in the day the participants to the trade are advised if their trade (or their customer's trade) will have action taken.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.