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risk trading internet outage liability LLC
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risk trading internet outage liability LLC

  #11 (permalink)
Elite Member
Europe
 
Futures Experience: Intermediate
Platform: NinjaTrader, CQG Trader
Broker/Data: Mirus
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Zen-Fire

This is what I got, too.


trendisyourfriend View Post
I think along your lines of thought. BTW, What is the link for ZenFires web interface ? i thought it was not yet active. Here is what i got from my broker:


There was a major internet outage this morning along the east coast significantly impacting the capacity of the region. Three core internet service providers each experienced interruptions leading to the loss of internet access for users or extremely slow connections while attempting to route through alternate paths.

As a result, orders routing to the data center were held up for long periods of time before reaching the Zen-Fire trading engine. Although not all Zen-Fire users were affected, the number of interruptions required the order routing services to be restarted forcing users to reconnect on a more stable path.

As the premier network and market data solution, Zen-Fire is implementing the following steps to prevent or minimize the impact of large-scale internet outages in the future.
1. Inform traders of a potential issue

Zen-Fire is working to integrate a RSS feed alerting users of the status of Internet connections. This service will be used to alert potential issues and keep traders informed on the latest developments.
2. Provide an alternate login to check order status and flatten positions

A new web based trading application will be available next month that will provide a mechanism for traders to check the real-time status of orders and positions. Traders will be able to send a 'Flatten' command directly to the engine and avoid any 3rd party trading application. This tool will only show orders that have made it to the engine and can be used to confirm the status of 'pending' orders on other platforms.
3. Addition of new ISPs

Though previously relying on the core Internet Providers, additional regional ISPs are being integrated over the weekend to serve as emergency backup when the majors become unresponsive. In rare cases, they may be used to carry the primary load for short periods of time or serve as excess bandwidth during minor outages.
4. Closer integration with 3rd party platforms

The Zen-Fire development team is working with 3rd party developers to help improve the stability and efficiency of their platforms by helping to make them more closely integrated with the engine.

If you have any further questions regarding the technical details of the outage, please contact your broker for more information.


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  #12 (permalink)
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zen fires web interface

The problem was not my connection. Mirus couldnīt flatten my positions! And I really have no problem when connection is frozen as I have my stoploss at the exchange. But with an OCO this is a problem.

If a LLC helps I donīt know. Thatīs the 2nd reason why I started the thread to find out. I think that as in "normal" business there is limited liability with LLC it might be here, too. I donīt find a difference between trading flowers or contracts;-) Hope weīll find it out to save ourselves from others failures.



steve2222 View Post
Are you sure an LLC will shield you?

I thought the brokers required a personal guarantee if you traded through a company/LLC.

For someone who lives outside the US (like I do), one way to help mitigate massive losses is to only keep in your account with the broker enough funds to cover your normal margins and drawdown. If something goes badly wrong (black swan) and the broker closes my positions out such that there is still a loss in my account, then he is going to have to come and chase me overseas for the balance.

@FatTails - what broker do you use?

PS: forgot to add that apparently on Monday you could still access your orders via ZenFires web inteface. I have access to this and it useful in such situations.


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  #13 (permalink)
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operational risk


Thank you for your information about LLC. Are you sure this will be a solution or do you assume because of the definition of a LLC maybe?

Referring to the idea with the terrorist attack (or maybe a fire) on the exchange I think now that it is more save to trade forex. As there is not one point, one market where all comes together and can be impacted directly.




Fat Tails View Post
This is an important question, thank you for putting it up here.

Operational risk cannot be excluded, but it can be reduced. If you have a long position and the exchange is hit by a terrorist attack there will be a problem to exit in time, and the world maybe different afterwards.

The operational risk includes several elements, and not all of them can be totally managed.


Managed by Trader: Telephone Lines, Internet lines, PCs.

Redundancy required. I have a second PC (laptop), which is always charged. I have a mobile backup internet connection, in case my fixed line does not work. I have a fixed and a mobile telephone line.

I use a broker, who allows for OCOs , so in case I have a technical failure, the OCO is still supposed to work as I do not hold the bracket orders locally on my PC.

Important: If both internet connections fail, I have prepared a list of different phone numbers to join my broker to close all positions immediately.

I do not understand your post. If your internet connection fails, why don't you just phone your broker and close the position?

I am not engaging in (unsupervised) automatic trading, as I would need to rent server space on two PCs in two different locations, which would mutually control each other.

Managed by Broker: Telephone Lines and access to the exchange

If the broker fails, I am in trouble. First I will not know, whether I have a position or not, as it is not clear whether orders have been correctly transmitted to the exchange. Also I should know which of my running orders are locally simulated by the broker or held by the exchange. Do you know, whether your stop order is held by your broker or by the exchange?

Once I know my position and how running orders are handled by the failing broker, I can use a second broker to set off the first position. Problem here is to get the information, because the broker lines will be crowded.

Managed by Exchange:

If the exchange stops working, you can set off your position with a hedge via a different exchange. For example you could set off a long position of TF (ICE) with a short position of ES (CME). This requires an additional margin from your broker, as the new position will not benefit from margin reduction applicable to spreads. Make sure that you don't use all your margin, because in case of an adverse event, you may not be able to set off the position because of margin requirements. In this case the margin mechanism, designed to protect you, makes things worse.

Important :

By going through all adverse scenarios, it is possible to be prepared for a number of scenarios to follow the pre-established rescue plan. BP did not have such a plan in case of an oil spill, and as everybody noticed this made things worse.

Yes, a LLC will shield your personal wealth from an adverse event.


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  #14 (permalink)
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tony2604 View Post
They told me they canīt do anything! (and not in a friendly way)

Change brokers now.

And get a second broker, who clears with someone else.

If your new broker can't get you flat under the same circumstances (markets are trading fine but they and you have connectivity issues), offset with the other broker i.e if you were long 5x TF contracts when you went blind, sell 5x TF contracts with the other broker until you can see.

And don't worry about hiding behind a LLC wall. Take responsibility for your trading activity.

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  #15 (permalink)
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Fat Tails View Post
I do not understand your post. If your internet connection fails, why don't you just phone your broker and close the position?


I also tried calling every phone # I had for the broker. Busy, busy, busy. I finally sent an email requesting that any open orders be closed. I got a response back fairly quickly from the rep that he couldn't do that and I needed to call the trade desk. Tried again. Still busy. By then I had gotten another order through Ninja and it looked like I was flat. The email from my rep had a new direct line phone # and I called it. I asked him if he could please check if I had any open orders. He did and I was flat by then.

A bit stressful for awhile, but thankfully only a small loss. Could have been much worse.

As I thought about it the rest of the day, I was actually thankful that it happened to me at a time when I had a small position on. I had not experienced anything like that before. I have had my share of goof-ups with the DOM or chart trader. But this time I just felt totally helpless. Well, here I go!!

I also want to check out the web based ZenFire app. It's interesting if that would have still worked and the rest of ZenFire was broke. A contigency plan is very vital. And obviously mine came up short.

I am not sure that one can hide behind an LLC. Make sure you use mulyiple very reliable resources if this is what you want to do.

Mahlon

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  #16 (permalink)
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tony2604 View Post
Thanks that you brought up this question: I do not understand your post. If your internet connection fails, why don't you just phone your broker and close the position?

Maybe I didnīt explain it 100% correctly, thought so. I CALLED THE BROKER SEVERAL TIMES! THEY ANSWERED THEY CAN NOT FLATTEN THE POSITIONS!!! This is why I started this thread. I have in the meantime excuses and explanations from the broker. But however - they could not flatten my positions! This is the issue. If so I really would not write this here. And the point you brought up too with terrorist attacks is also an issue I thought - but I didnīt wanted to write this in my first post. So maybe you think, this guy can not call his broker by telephone - I did 20 times to reach one person - and he is afraid of terrorists and aliens, too.

And I know that the orders or bracket orders can be held at the exchange and at the brokers server. But they are handled from my computer. And I know where my stop is - it is on the exchange. And my OCO was on the exchange. And this is the issue. It would be better if in case of bracket order the stoploss only is actually on the exchange and the target on my PC. Then itīs not the worst - as my stoploss is filled but no new entry is realized.

Hi Tony,

I apologize. I did not read your first post in depth, you already wrote that you tried to call your broker. If your broker's order execution system also relies on Zenfire, which I do not know, for sure they cannot do anything. Only way out of this might be an account with a second broker, and make sure that the second broker is not using Zenfire.

Following your post, I have tested my OCO/Interactive Brokers functionality with NT7 once again. It works as expected. If I cut off NinjaTrader or my computer, the OCO stilil resides with Interactive Brokers on their servers and is correctly executed.

However if Interactive Broker's systems are down, I will have the same problem as you had. And then I do not know what happens, if their servers will run again. Will the order still be executed? At what price? I do not know if they hold both legs of the OCO, the limit order and the stop order on the exchange. If this is the case, I might be first stopped out and then reverse the original position at the profit target. How would I know, whether I am long, short or flat?

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  #17 (permalink)
Just a boy
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Zen Fire web interface link


trendisyourfriend View Post
I think along your lines of thought. BTW, What is the link for ZenFires web interface ?

https://beta.zen-fire.com/login/

As mentioned elsewhere, you can only log into ZenFire once. So if you want access via NT and this web interface at the sametime (which you really do need for disaster/redundancy reasons) then you need to ask your broker to allow you to have multiple logins to ZenFire. I have and it should not be a problem.

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  #18 (permalink)
Just a boy
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LLC requires personal guarantee


tony2604 View Post
If a LLC helps I donīt know. Thatīs the 2nd reason why I started the thread to find out. I think that as in "normal" business there is limited liability with LLC it might be here, too. I donīt find a difference between trading flowers or contracts;-) Hope weīll find it out to save ourselves from others failures.

See attached (page 11 I think), well at least Dorman (Mirus/Amp etc) requires a personal guarantee for an LLC account - so no protection there.

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risk trading internet outage liability LLC-corp.pdf  
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  #19 (permalink)
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Fat Tails View Post
I use Interactive Brokers. UK subsidiary is registered under the FSA and deposits should be guaranteed up to GBP 50,000. NinjaTrader transmits OCO orders to Interactive Brokers. I think that these orders reside on the server's of Interactive Brokers, will have to enquire again into this.

The orders reside on Interactive Brokers servers.

I can't imagine how scary could have been this, down for minutes, impossible to close position by phone, etc.
I'm using IB, like @Fat Tails, and sometimes I'm not happy with them because of the feed quality, the bad Ninja integration, the high margins, the commissions which could be lower, etc, etc, but I never had an issue like this one in years.
I won't comment the issue itself, it's not supposed to happen, never, unless a 9/11 event, and that was not the case here. Not serious at all, really not.
The easy way to avoid this situation, if people wants to keep a "cheap but maybe not so reliable" broker, is to have another broker, and quickly hedge the positions when things goes wrong.

Success requires no deodorant! (Sun Tzu)
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  #20 (permalink)
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I was one of the lucky few that got plowed by this outage. I was only trading 1 contract, and it was only a few points, but it was still frustrating. The biggest bother is that I called my broker and order desk maybe 30 times, neither answered. But thats what I get for not doing my orders OCO.

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