There is abundance of claims that markets (by definition US markets) are rigged. Rigged in the sense that orders are often executed in a way, which contradicts to the natural intent of the person/machine behind the order. Until now, I have dismissed most of these as (populist) speculation, or, conspiracy theory. There is some truth in it however and my feeling is that it’s detrimental to all participants, yes, even to the “winner” in the examples I am going to show.

As most of the readers know, I trade futures, besides other things. My approach is to submit all my trades in a single shot to Interactive Brokers and be done for the day. Obviously, a good number of the orders are using stops and limits.

Two days ago, I was surprised that I entered a position in the Soybeans contract. Here is a chart:

Be the judge: do you see the spike at the high of the day? In the box we have the high – $890. Guess where I had my stop – yep, that’s right, at $890.

Two days later, different contract (Soybean Oil), same shit:

Do you see the very bottom of the day – yep, that’s where my stop was, at $30.70.

Now, to most of you Soybeans and Soybean Oil sound exotic, but these are decent size contract, trading between 50,000 to 100,000 a day lately. Keep in mind that a single contract (for the Soybeans) is close to $40,000. So, this is quite liquid market.

So we come to the point of this post – chances of this happening by chance – how about zero? To put it bluntly: This was a bullshit execution. Either the market making algorithm (these contracts are listed on ECBOT, so I assume electronic execution) is flawed, or, it has flaws which allow third-party players to take advantage of otherwise completely legit orders.

Moreover, no-one wins in the long run from this BS execution. I didn’t win, in fact, I already lost money on the Soybeans (compared to what I would have done if I didn’t get the bullshit execution), the jury is still out on the Soybean Oil – it depends how this trade would have developed.

The exchange cannot win from this BS. It’s putting off retail traders for sure, and I am skeptical even how many of the bigger players can avoid the BS.

Last but not least, if there was a speculator, or an algo, on the other side, who profited off me – guess what, he is going to run out of customers pretty quickly. The point is simple – ridiculous (unfair or “against the intent”) execution helps no one. Yet, it’s obviously there. Please convince me otherwise.

As for me, I am going to change my approach to ECBOT futures – no more limit/stop trades. I guess I will be trading less on this exchange, at least for a while. I am still going to continue trading the same way on other exchanges – I haven’t noticed similar issues with futures listed elsewhere, at least not to this degree. I am also going to follow up with my brokerage, about possible solutions, but any resolution is going to take time.