who is liable for a loss due to a software problem ?
do you agree that chart/order entry program authors, brokers' usually only ? account
software, and data feed providers including exchanges are liable for any and all losses
that are a direct result of a problem with Their software ?
The short answer is that there aren't many things in a court of law that are absolute.
Attorney's usually describe things in terms of "weak argument" and "strong argument." Throw in the unpredictable nature of a jury, and quickly you discover that the rule of law is really the gamble of law.
I'm sure that you've signed an agreement that's longer than the constitution with respect to "liability."
In contract terms, this is referred to as a "hold harmless" where the platform provider, data provider, and broker make it perfectly clear that you're accepting their products and all the liability that goes along with it. And from an objective perspective, that makes perfect sense.
YOU decided to choose their product based off their reputation in the marketplace.
HOWEVER, if a suit could somehow prove that the product provider were engaged in malicious or dilberately negligent activity, then you might have a "stonger" case.
I.e. if the product provider knew that it would produce losses for it's clients by shutting down a piece of IT infrastructure (but save them loads of cash) for whatever reason....or they intentionally tried to screw you (for whatever reason). But this would be insanely difficult to prove and would cost way more money than your suit/losses are worth.
I can't remember the legal term for this type of legal barrier, but essentially, product providers know that unless you file a class action suit, the size of the harm done to any single customer is miniscule in comparison to the costs and headaches associated with proving malice and/or fraud and going all the way to trial.
I.e. why would you spend $100k to sue someone over $5k in damages? Most people don't.
And they ALSO know that unless the problem becomes so pervasive that the word spreads and people band to form a class action suit, there's little risk for the provider.
To wrap it up...check the disclaimer and the agreement you signed. I guarantee it has you dead to rights on just about any issue that may arise.
"A dumb man never learns. A smart man learns from his own failure and success. But a wise man learns from the failure and success of others."
Another thing to consider: who in their right mind would offer a product that can be used to trade millions and (in the case of, for example, Eurodollar futures contracts) billions of dollars of notional value, and be willing to be liable for an error that might occur using that platform? If all software developers were liable for trading losses that could result from an error in their software, they'd never sell products to the public.
I think it is normal for the broker to instantly place blame elsewhere. I've seen that kind of behavior, and after enough questionable results of trades in my account, I switched brokers.
I think when you find a good reputable broker, you don't even need to ask these questions because these kinds of events don't happen.
But if they did, then you ultimately must accept full responsibility. If your software is unreliable, that is not the brokers fault. Even if the broker wrote the software. It is your fault for using that broker and/or software.
In the past, I had to fight with a broker more than once due to fills that made no sense. Like I said, I just ended up switching brokers. I've never even one single time had any problems remotely like this with my current broker.
I don't jump to conclusions as to "why" there were problems with my old broker. I simply know there were, so why would I stay? Same thing with trading software. If the platform is causing trouble, why are you using it?
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The following user says Thank You to Big Mike for this post:
RM99, your reply about blew my thread off the board ;
maybe very few traders actually experience a loss due to software
perhaps they've done battle with a broker, program and or data feed provider and like
Big Mike simply left and gone elsewhere, but regardless of the current status quo it
seems to me They do have liability - furytrader
eg: phone and ISP companies accept it if one's service is down for more that x hours
after last year's 'Flash Crash', didn't the exchanges wash all or some of the trades
that resulted in losses ? and bear in mind that wasn't a software problem but a legitimate
trade. it was something the exchanges could do but didn't Have to do
Oanda have been notorious for disconnecting their feed particularly before-during-after
the NFP release, not sure if they're still doing that and I'm not aware of anyone taking
a loss as a result of the disconnect, just not being able to trade
some years ago FXCM messaged clients via the trading platform that no trades would
be accepted 15 ? minutes prior to a release which was at least a legitimate method
of controlling trading
demo trading NinjaTrader some time ago with a v6.5 I had out of the price fills that the
company couldn't explain but a thread elsewhere resulted in a live trader saying he'd
experienced the problem and eventually switched broker and data feed - still uses NT ?
a year or so later I discovered the same problem immediately demo trading with v7 but
this time nt had a fix, so it was obviously a software problem of theirs
the Mirus Zen-Fire feed had some horrendous problems twice in the past couple of
years with the last due I think to ISP routing which affected some but not all of the ZF
clients; don't know if there were client losses
leaving out the word liable, I think They need to accept responsibilty and make good
if a client has a legitimate complaint. at the same time it does no good to simply move
on to another broker, trading platform, datafeed; the trader should post the problem
they've experienced on forums and, register a complaint with the regulator/s of the
country they live in. such complaints start the process of change, the problems which
everyone may well be aware of become 'official' and - I'm presuming - by doing so are
likely to be acted upon to change the status quo
My point is simply that the magnitude of the financial liability for a trading software provider is FAR greater than that of an ISP or a telephone company. Again, if the trading platform provider were, in fact, required to make up any trading losses that resulted from problems from the software, the economics of offering the platform to the public may not be attractive at all.
As a counter-argument, when futures pit trading was more active, the broker WOULD be liable if an order wasn't executed or it was executed incorrectly. Given that brokers were not making big $ in filling individual orders, the economics there too would seem discouraging. Yet, we had futures brokers (and still do, although on a much more limited basis).
I understand where you're coming from, but I imagine many software providers would no longer offer products if they had to be on the hook for trading losses that are virtually impossible to quantify.
1. Record your screens (DOM, Charttrader, etc..) when trading live.
2. Always watch your trade logs and make sure you can read them.
3. If you notice the discrepency, DO NOT WAIT to notify the broker even 10 minutes. This order could be OCO or attached to another order that you can't see etc..
I was trading w/ ATC Brokers a while back. I noticed that I had a few issues with me clicking to enter, then 30 seconds later it would enter me! Sometimes this worked out, but most of course not so good.
I started recording. Within a 90 day period, I had probably 3,000.00 worth of 'goofed up' trades (I was trading about 6-10 contracts)
I showed ATC (Patrick) the issue, and at first he denied it and promised me a cheaper transaction price etc.. I found out he didn't even look at the video I sent and it was about 800.00 of balogne trades.
Another time the same thing happened and voila it actually helped me get some back after the server goofed.
What I learned out of this is the 3 rules above.
If you want to file a complaint, then contact the National Futures Association and file a discrepency. They will investigate and see if this is something that is happening a lot and if enough people have this issue, they will come down hard and fast on the broker.
You do not need to sue, they can actually put enough weight to get you your money back most likely. Good luck!
---EDIT: Oh, to answer your question, yes they are liable if the order made it to the exchange. If it didn't, then no.
I've had periodic disconnections and was experiencing the one reported in the above
thread but didn't pay much attention as the re-connects occurred so quickly
one thing was I'd been trading spot fx and was demo trading NT with the ZF feed prior
to switching to the 6E futures contract
but the feed and NT problems at that time scared me away from switching over
once NT v7 was available and AMP offered the CQG feed I opened an account with them
on one hand how the whole computer + internet works is amazing, as well as using the
system to trade with rather than a phone, on the other hand is the idea that no one has
to take responsibility when things go wrong, and that has to change