The only thing really annoying here is that all this wackiness is backstopped by the Federal government. Nobody has any doubt that at the end of the day they will step in to save GS if everything really goes sideways. And that's probably a good thing. But it's very strange that the big banks, which are essentially quasi-state actors at this point, get to keep so much of their profits when the public is bearing so much of the risk.
This is the real difference between China and America: in China the government does everything in its power to make sure its state-owned enterprises succeed and then it takes its pound of flesh. In America the government does everything in its power to make sure its state-owned enterprises succeed and then it gives them a huge tax cut to make the shareholders that much richer. It's a bold move, let's see how it plays out.
Just like the idea that the aristocracy should be accountable to the same laws as commoners, right?
I think what the poster meant is that deals are just contracts and can be amended if both parties agree. For large banks with longstanding relationships, that is naturally much easier than for a trader that no one knows.
https://www.ft.com/content/c5bca040-37c6-11e8-8b98-2f31af407...
The word is naive.
The rules in place are exactly backwards. the $50 dollar team is held to a high standard, with no affordances. the $50 billion dollar team is part of the club, so enforcers look the other way when they screw up.
A dude losing $50? Give me a break, his risk is his own. Consider his $50 a small price to pay for learning how things work. And let me remind you, it is a very small price.
That's exactly how the big corporations hold the whole country hostage. When they do things well they get to keep all the profits and distribute them but when things go bad it's suddenly nobody's fault and the rules have to be changed. Since 2008 I am of the strong opinion that if someone in a corporation makes a big mistake we should let them go under without hesitation. Otherwise they can always blackmail us into being bailed out or working under a different set of rules if they make a mistake.
Have a thousand people throw in a thousand bucks, each one selects an option play to purchase. Randomly select the purchase. If the play is profitable, keep the money. if it's a loss get the trade reverted because 'a lot of people were involved in the process.' I can make the process as convoluted an necessary to meet your 'no one person you can lay blame on' rule.
I think that's a stupid rule, because it's so easy to hack.
The more money staked on a trade, the higher the threshold should be to roll it back. More people mean more chances to catch the error, not the other way around.
edit
also, the corporation itself is the person that takes the blame. if it can't manage itself, it shouldn't manage your money.
Are stock market players not allowed to divest extremely suddenly, to dump their property at fire sale prices in order to get rid of it at what would be a paper loss, all the while knowing the consequences of holding would be worse?
What if they're dumping equity in a company that will be known to have committed terrorist acts? I'm not sure if I buy 'clearly erroneous'. I also don't buy that the scale of the error was really threatening to Goldman Sachs.
There is no "whether or not who should morally be able to roll back a trade". There is a "hey, we are a customer of your business, we do a lot of business together and I make you a lot of money. We had a once in a blue moon mistake in our billions of lines of code, can you help us out. Other banks are watching and there are plenty of other exchanges to do business with"
Nah.
> Do you have any idea of the scale and complexity and risk of the code they have deployed?
No. But apparently neither do they.
> ... I make you a lot of money. ...
With basically every other risky thing people and corporations encounter, the response is "go buy insurance". Usually they're told that by finance guys.
But hey, good for them.
And the answer to that should be "sorry, if we will roll back your trade, SEC will put us out of business on the fraud charges".
Nothing about this is fraud.
Moreover, the trade being busted, the guy that initially made the money, probably found himself in a very uncomfortable position, since chances are he already covered his risk and hedged the lucky trades. So overall, he lost money just because Goldman was able to force the rules in their favor.
Unfortunately, markets are rigged, just as most things -> the bigger you are, the more influence on the rules and how they are applied you have.
A smaller trader has proportionally less history in the market to use as a evidence something is wrong and the rollback rules should apply.
"The New England Patriots reached ten Super Bowls, therefore the foot out of bounds just before scoring a touchdown was clearly a mistake and out of the ordinary. Therefore, award the Patriots the point, on the grounds that they usually don't make mistakes like that. And don't check the pressure in the football please, there have been ten Super Bowls where that wasn't apparently a problem…"
(I wonder who I'm insulting more, the Pats or Goldman Sachs :D )
It sure does seem like there are two sets of rules on Wall Street. I doubt any small trader would be able to reduce their losses 90+% after errantly submitting a bunch of live options orders.