Euronext compensating for mess
Apart from the usual issues with our fragile currency and defaulting Mediterranean nations, there was surprising news from Euronext – the troubled exchange which is experiencing great difficulty in basic operations. The Dutch retail investor association VEB launched a compensation procedure for the great mess up of July 29th.
The expiration procedure of the Weekly AEX options, the AX5 was settled 2,5 points too high. All retail investors will be fully compensated for losses due to this “technical error”. That’s great news. Investors with long calls (or short puts) got away with some unexpected profit in the first place, and those with long puts (or short calls) are getting compensated for unexpected losses.
Total amount of compensation is estimated at 500k. Quite a modest amount to be honest. The damage for investors results from an outright delta gamble (in-the-money options) and from those worthless out-of-the-money calls which suddenly settled seriously in-the-money. Unclear whether or not professional market makers will be compensated and are included in the estimate.
What about August 9?
Of course, Euronext denies any wrongdoing and refers to the compensation as a “goodwill payment”. Another open question is one of the other “technical errors” – August 9th was messed up in similar way. The error was 1 point, and I guess open interest the daily options is a lot smaller.
The quotation marks on the “technical errors” are on purpose – the inability to calculate index levels is an organizational problem. Euronext is a corporation with thousands of employees, but one with a simple spreadsheet to calculate an index level couldn’t be found.
The procedure of the Exchange Delivery Settlement Price (EDSP) calculation is changed, too. Basically the exchange isn’t sure whether or not they are delivering the correct settlement price – they decided to introduce Provisional EDSP. Market makers will check the calculation every day, and have the right to call for a recalculation. More details and rules here (pdf).
TOM Trading when are you gonna get started?!
ieniemienie
Why cant that 500k be recovered from people who gained free money sitting long calls,
i’ve been away for a few months – what’s happened to this place? 3 stories in 24 days and only 25 comments?
@ 8:19
I guess all the wannabe traders from Aussieland probably lost their jobs and now are forced to make some money flipping burgers at KFC which leaves them no time to make stupid comments on this site.
@ 8:19
I guess all the wannabe traders from Aussieland probably lost their jobs and now are forced to make some money flipping burgers at KFC which leaves them no time to make stupid comments on this site.
Europe: How u going with all that debt enslavement? Must be nice subsidising greeks sun baking, playing checkers all day and dodging taxes.
TRADERS WORSE THAN PSYCHOPATHS?
http://bottomline.msnbc.msn.com/_news/2011/09/27/7993962-traders-more-reckless-than-psychopaths-study-shows
Errrrm I guess these guys never heard of idb brokers at places like Cantor and TFS!!!!!
‘Pascal Scherrer studied the behavior of 28 financial traders’
In financial markets there are well known phenomenon of fat tails and over-fitting research, both are well demonstrated in this study,
“for me to win, you must lose” mentality, that’s all.
TOM.eu !
its not really zero sum but it is very competitive, the speed and diming.. the best eg is protecting your research/trading positions ..If your positions/research are so good, why not raise them even more and squeeze the other side out .. that should be no brainer ..
Today big problems again at Euronext. CCG is down for some ITMs. At 10:15 we still can not log in !!
Same problem here..No connection
we don’t care
All Options doet vandaag 100% van het volume op Euronext.
omdat ze eindelijk hun systeem op orde hebben?!
and another CCG #FuckUp#message coming in
13:00 I am online !!!! but where is the volume ?
Please be aware that trading has been suspended on Trading Engine 1 due to technical issues.