Mistrade

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Under the Anglicism Mistrade ( German  "faulty trading business" ) one understands in finance a faulty business with securities in on- exchange and off-exchange securities trading .

General

A mistrade can be triggered, for example, by a fat finger error . Traders in financial markets also refer to a losing business as a mistrade.

In the terms and conditions for securities trading , the stock exchanges have anchored rules on when a mistrade occurs, under what conditions such a transaction is canceled or reversed and what other consequences such as damages or contractual penalties result.

In a recommendation by the Federal Council , which was not included in the Stock Exchange Act , it said: “In principle, the German legal system guarantees legal certainty with regard to transactions that have been concluded. Deviations from this can be made through regulations of the stock exchanges (mistrade rules) ”.

Effects

Mistrades are relatively rare. The Stuttgart Stock Exchange gave z. For the year 2005, for example, assume that mistrade requests were made for 0.006% of all businesses.

They easily lead to significant damage. The Tokyo Stock Exchange was heavily criticized in late 2005 for not having adequate mistrade rules. A trader looking to sell one J-Com share for 610,000 yen placed an order for 610,000 shares for one yen. The Tokyo Stock Exchange did not suspend trading in this security , nor was the security order canceled . The damage to the bank amounted to 300 million euros.

Frankfurt Stock Exchange

At the Frankfurt Stock Exchange , the mistrade rules are laid down, for example, in the "Implementation Regulations for Section 29 of the Conditions for Transactions on the Frankfurt Stock Exchange (Mistrade Rule)".

After that there is a Mistrade the Skontro -based trade before when

  • there is an error in the technical system of the exchange,
  • an error occurred when entering the limit of an order and the price was not in line with the market as a result,
  • at a price that is obviously not in line with the market,
  • failure of the transaction would result in damage of at least one thousand euros.

Incorrect entry of the volume does not entitle you to submit a mistrade application.

Deadlines for mistrade applications

In order to create legal certainty and market integrity in accordance with the EU Market Abuse Directive and to avoid lengthy legal proceedings, all stock exchanges have very tight deadlines for submitting mistrade applications.

At the Frankfurt Stock Exchange “the mistrade application must be submitted within two trading hours after receipt of the confirmation of execution in accordance with Section 2 Paragraph 1 Clause 2”.

If, in the case of transactions in securities other than structured products that are traded in continuous auction, the application period in accordance with sentence 1 ends after the end of trading hours on a trading day, the mistrade application must be submitted no later than half an hour after the end of trading hours. According to § 32, the mistrade regulation of the exchange rules replaces the legal contestation periods according to § 119 BGB .

A mistrade request must be submitted at Eurex within 30 minutes. In exceptional cases, a mistrade request that arrives three hours after the trade is concluded can also be granted. Here, too, the mistrade regulation replaces the legal contestation periods according to § 119 BGB .

A request for review must be submitted to the NYSE , BATS , CBOT , NASDAQ , OMX , and American Stock Exchange within 30 minutes of the time of trading.

At NYSE-Euronext Liffe (Paris, Brussels, Amsterdam) the “Market Services” department must be contacted within 30 minutes from the time of trading to request a suspension.

At the Singapore Exchange , the incident must be reported to the SGX-ST within 60 minutes.

A “ clearly erroneous trade ” must be registered on the London Stock Exchange within 30 minutes.

In over-the-counter trading, individual mistrade agreements between the custodian banks and trading partners regulate the deadlines for a mistrade. Although there are a large number of regulations, all regulations have in common that the deadline for a mistrade application ends at 12 noon on the next trading day at the latest.

In an Obiter dictum ruling by the Federal Court of Justice , mistrade clauses allow “the limited opportunity to unilaterally withdraw from the contract if the transaction was concluded at a price that was not in line with the market”.

Exclusion of civil law contestation options

So that the mistrade rules are not circumvented and the courts do not have to deal with the question of whether a deal is going to endure or not, most stock exchanges explicitly exclude the possibility of civil law contestation of the deal.

Only in this way is it possible under civil law that even obvious mistrades are not canceled retrospectively by contesting errors and that the banks would therefore have to bear the losses.

Jens Ekkenga writes in the Munich Commentary on the Commercial Code : "The cautious approach to contesting errors in the securities business is justified on the one hand with the fact that contesting typical mass traffic transactions could have a widespread effect that would be detrimental to traffic safety".

Well-known large mistrades

  • In 2005, investors bought warrants from a bank. This had obviously been wrong about ten times the pricing and subsequently adjusted the terms of the issue. The BGH ruled, however, that “clauses in the general terms and conditions of issue, according to which the issuer of warrants can change the conditions, insofar as this appears appropriate and necessary to meet the economic purpose of the conditions, if the change is intended to serve an obvious error correct, are ineffective according to § 308 No. 4 BGB ”. According to unconfirmed reports, the total damage was 60 million euros.
  • In 2006 there was a fat finger bug caused by a trader at Mizuho Securities in Japan that resulted in extremely large numbers of a share being sold. Allegedly it cost 40 billion yen to make up for the mistake.
  • In 2014, a Japanese broker placed securities orders worth USD 600 billion on the stock exchange, but these were canceled. If the order had been met, they would have valued the gross domestic product of Sweden topped.
  • In 2015, according to Focus , Bloomberg and FAZ, an extremely large mistrade occurred in Germany when the Frankfurt investor Armin S. bought certificates for EUR 326,400 from the French BNP Paribas Arbitrage , the real value of which BNP six days later - in retrospect - at 163 million . EUR prized. The BNP not only rated this certificate incorrectly, but also failed to book more than 8000 other certificates, so that the error could not be recognized.
  • In 2016, the British pound lost 6% against the US dollar in a matter of minutes - a flash crash . It is believed that the price crash was triggered by a fat finger mistake.

See also

literature

  • Angela Lindfeld: The mistrade rules: Requirements and legal consequences of the cancellation of securities transactions in on-exchange and over-the-counter trading . Nomos, Baden-Baden 2008, ISBN 3-8329-3599-1 .

Individual evidence

  1. ↑ Trader. They're all gamblers! Or? Not every day is a good opportunity. In: Handelsblatt.de. Retrieved April 20, 2017 .
  2. ↑ BT-Drs. 16/4028 of January 12, 2007, draft of a law for the implementation of the Directive on Markets in Financial Instruments and the Implementing Directive of the Commission (Financial Market Directive Implementation Act) , p. 291
  3. ↑ Stuttgart Stock Exchange, quoted from Deutsche Bank Research (PDF; 353 kB)
  4. ↑ FAZ of August 12, 2006 "Probably the most expensive typo in the world"
  5. ↑ Exchange rules of the Frankfurt Stock Exchange. (PDF) (No longer available online.) In: deutsche-boerse-cash-market.com. March 18, 2016, p. 77 , archived from the original on January 15, 2017 ; accessed on January 7, 2017 . Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. @1@ 2Template: Webachiv / IABot / www.xetra.com
  6. ^ Conditions for transactions on the Frankfurt Stock Exchange. (PDF) (No longer available online.) Frankfurt Stock Exchange , November 30, 2015, archived from the original on January 15, 2017 ; Retrieved November 20, 2016 . Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. @1@ 2Template: Webachiv / IABot / www.xetra.com
  7. ^ Conditions for transactions on the Frankfurt Stock Exchange. (PDF) (No longer available online.) Frankfurt Stock Exchange, November 30, 2015, p. 13 , archived from the original on January 15, 2017 ; accessed on November 20, 2016 : "For transactions in securities that are traded in the continuous auction, the mistrade application must be submitted within two trading hours after receipt of the confirmation of execution pursuant to Section 2 (1) sentence 2. If, for transactions in securities other than structured products that are traded in the continuous auction, the application period in accordance with Clause 1 ends after the end of trading hours on a trading day, the mistrade application must be submitted no later than half an hour after the end of trading hours. " Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. @1@ 2Template: Webachiv / IABot / www.xetra.com
  8. ^ Conditions for transactions on the furter stock exchange. (PDF) (No longer available online.) Frankfurt Stock Exchange, November 21, 2016, archived from the original on January 15, 2017 ; accessed on January 6, 2017 : "Civil law claims of the business parties in accordance with § 2 Paragraphs 1 and 2 for the cancellation and adjustment of transactions and the right to contest transactions are excluded" Info: The archive link was automatically inserted and not yet checked. Please check the original and archive link according to the instructions and then remove this notice. @1@ 2Template: Webachiv / IABot / www.xetra.com
  9. ↑ Conditions for trading on Eurex Deutschland and Eurex Zürich. (PDF) (No longer available online.) Eurex, August 1, 2016, archived from the original on December 21, 2016 ; accessed on December 15, 2016 : "... in compliance with the formal requirements according to section 2.8.2, after 30 minutes, but not later than 3 hours since the transaction was concluded and before 30 minutes after the end of the trading period of the respective product the trading day on which the deal came about ... “ Info: The archive link was automatically inserted and not yet checked. Please check the original and archive link according to the instructions and then remove this notice. @1@ 2Template: Webachiv / IABot / www.eurexchange.com
  10. ↑ Conditions for trading on Eurex Deutschland and Eurex Zürich. (PDF) (No longer available online.) Eurex Deutschland and Eurex Zürich, August 1, 2016, archived from the original on December 21, 2016 ; accessed on January 6, 2017 : "With regard to the transactions concluded on the Eurex Exchanges, civil law claims of the business parties within the meaning of Number 2.3 Paragraph 1 to Paragraph 3, which are aimed at the cancellation of such transactions, in particular a contestation due to error, other rights of avoidance and claims under civil law that aim to adapt the content of such transactions are excluded ” Info: The archive link was automatically inserted and not yet checked. Please check the original and archive link according to the instructions and then remove this notice. @1@ 2Template: Webachiv / IABot / www.eurexchange.com
  11. ↑ Clearly Erroneous Executions. (PDF) NYSE , June 19, 2014, accessed on November 20, 2016 (English): "Requests for review must be received within thirty (30) minutes of execution time"
  12. ↑ SEC Approves Rules on Consistent Exchange Breaking "Clearly Erroneous" trades. October 5, 2009, accessed November 5, 2017 .
  13. ↑ BULLETIN DE PARIS No. 2007 - 030. NYSE Euronext Liffe, September 25, 2007, accessed November 28, 2016 (English, French).
  14. ↑ Singapore Echange Rulebook. Singapore Exchange, February 14, 2014, accessed November 5, 2017 .
  15. ^ SGX Reveals Information Concerning Revised Error Trade Policy. Retrieved November 5, 2017 .
  16. ^ Rules of the London Stock Exchange. (PDF) London Stock Exchange, March 13, 2017, p. 40 , accessed on May 5, 2017 .
  17. ↑ OTC issuer trading. ViTrade GmbH, December 18, 2016, accessed December 18, 2016 .
  18. ^ BGH: judgment of June 30, 2009; Az. XI ZR 364/08. In: openjur.de. June 30, 2009, accessed December 15, 2016 .
  19. ^ Frankfurter Wertpapierbörse: Conditions for transactions on the Frankfurt Stock Exchange. (PDF) (No longer available online.) Deutsche Börse, January 3, 2018, p. 32 Exclusion of civil law claims , archived from the original on February 25, 2018 ; Retrieved on April 15, 2018 : "Civil law claims of the business parties in accordance with Section 2 Paragraphs 1 and 2 for the cancellation and adjustment of transactions and the right to contest transactions are excluded" Info: The archive link was automatically inserted and not yet checked. Please check the original and archive link according to the instructions and then remove this notice. @1@ 2Template: Webachiv / IABot / www.xetra.com
  20. ↑ Eurex Deutschland: Conditions for trading on Eurex Deutschland and Eurex Zürich. (PDF) Implementation of business cancellations or price corrections. (No longer available online.) In: eurexchange.com. April 2, 2018, p. 23 , formerly in the original ; retrieved on April 15, 2018 : "With regard to the transactions concluded at Eurex Deutschland, civil law claims of the business parties within the meaning of Number 2.3 Paragraph 1 to Paragraph 3, which are aimed at the cancellation of such transactions, in particular a contestation due to error, other Avoidance rights and civil law claims that aim to adapt the content of such transactions are excluded "
  21. ↑ Tradegate Exchange: Conditions for business on the Tradegate Exchange. (PDF) Tradegate Exchange, November 24, 2017, p. § 15a Exclusion of civil law claims , accessed on April 15, 2018 : "Civil law claims of the business parties for the cancellation and adjustment of transactions and the right to contest transactions are excluded"
  22. ↑ Federal Court of Justice: Judgment of June 30, 2009. BGH, June 30, 2009, accessed on December 20, 2017 .
  23. ^ Carsten Herresthal et al .: Munich Commentary on the Commercial Code, Vol. 6: Bank Contract Law . In: Carsten Herresthal et al. (Ed.): Munich Commentary on the Commercial Code . 4th edition. tape 6 . CH Beck, Munich 2017, ISBN 3-406-67706-1 .
  24. ↑ Federal Court of Justice judgment. June 30, 2009, accessed on November 23, 2016 : “Clauses in the General Conditions of Issue, according to which the issuer of warrants can change the conditions, insofar as this appears appropriate and necessary to meet the economic purpose of the conditions, if the change should serve to correct an obvious error, are ineffective according to § 308 No. 4 BGB. "
  25. ↑ fat finger error in the news. (No longer available online.) In: Financial Times. Archived from the original on November 23, 2016 ; accessed on November 22, 2016 (English). Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. @1@ 2Template: Webachiv / IABot / lexicon.ft.com
  26. ↑ Japan stocks rattled by $ 617bn 'fat finger' trading error. In: BBC. Retrieved November 22, 2016 .
  27. ↑ Anna Kitanaka and Toshiro Hasegawa: $ 617 Billion in Japan Stock Orders Scrapped After Error. Bloomberg, October 1, 2014, accessed November 22, 2016 .
  28. ↑ Christoph Sackmann: This man earned 163 million euros overnight - but his bank does not pay. Focus, July 5, 2017, accessed January 17, 2018 .
  29. ↑ Jan-Patrick Barnert, Jörg Engelbert Jäger: Daytrader demands from BNP Paribas € 152 million due to price error. Bloomberg, May 22, 2017, accessed January 17, 2018 .
  30. ^ Frankfurter Allgemeine Zeitung GmbH: "Mistrades": The 163 million euro man? July 30, 2017. Retrieved October 28, 2017 .
  31. ↑ Millionaire on paper. (PDF) In: InvestorPlus Magazine. Schutzgemeinschaft der Kapitalanleger, September 1, 2016, accessed on November 22, 2016 .
  32. ↑ Un trader réclame 161 millions d'euros à BNP Paribas . In: lesechos.fr . March 11, 2017 (French, lesechos.fr [accessed March 11, 2017]).
  33. ↑ Daytrader demands from BNP Paribas € 152 million due to price error. In: WORLD. Retrieved May 26, 2017 .
  34. ↑ Carloine Binham: BNP Paribas failed to book trades in Germany for a week. In: ft.com. March 9, 2018, accessed March 12, 2018 .
  35. ↑ Christian Siedenbiedel: Bank error in your favor. In: FAZ. March 10, 2018, accessed April 12, 2018 .
  36. ^ Bank of England investigating dramatic overnight fall in pound. In: The Guardian. October 7, 2016, accessed November 22, 2016 .
  37. ↑ Typo crashes pounds. Spiegel, October 7, 2016, accessed November 27, 2016 .