Another Cunning Stunt at the Amex

All that stuff about how The World’s Most Unnecessary Securities Exchange™ has, on its way to long overdue and justly deserved extinction, cleaned up its act? Fuhgeddaboutit, at least when it comes to odd-lot orders executed by the charming thugs on the floor of the American Stock Exchange.

At 9:38 am Monday, NakedShorts nibbled at an odd-lot—50 shares—of the ProShares UltraShort ETF (FXP) on the FTSE-Xinhua China 25 index. According to the consolidated tape, at least as reported by Fidelity Active Trader, FXP traded 2600 shares, from $101.34-$101.46, between 9:38:00 and 9:38:59.

My fill: $103.99, or a mere $2.53 over the high for the time in question. All of which raises a few interesting points worth keeping in mind:

• Trades involving leveraged and inverse ETFs need to be kept on a tight leash at the best of times, all the more so when dealing in odd lots; trying to get several orders off as the market sloughed around after the open, I broke my own hard-learned rule of never using market orders when playing with this stuff.
• While most of the juiced and upside down ETFs do a reasonable job of tracking their benchmarks day-by-day, they can deviate substantially intraday, especially in fast markets; they’re stocks and they’ll behave like stocks, regardless of what the underlying index says they should be doing.
• Example: the vanilla iShares FTSE-Xinhua China 25 (FXI) —dropped 43 cents, or 0.3 percent, Friday, on volume of 8.7 million shares. FXP, however, gained almost 2.3 percent (or getting on for four times its ‘expected’ return) on 3.15 million shares, or relatively heavy volume compared to its 10-day average. (See Pedant’s Note below).

• Learn something every day: odd-lot trades can be, but do not have to be, reported. Thus, according to the tape, the mugging did not happen; the ticket above begs to differ. (Apart from the screenshot (edited only to highlight the appropriate points and remove the account number), no record of the trade exists).
• The specialist for FXP is Kellogg Capital Markets, a wholly-owned subsidiary of Goldman Sachs (GS). NakedShorts has been unable to confirm that SLK handled the execution in question, but if he’s going to be taken for $126.50 more or less, it’s at least nice to know that it would have gone to a deserving cause.

The story does have a sort-of-happy ending; I registered a complaint with Fidelity and, within much less than an hour, was granted ‘price improvement’ to $101.70. Still outside the price range at the time of the trade, but not an unreasonable premium for the privilege of having a Mickey Mouse order filled.

This event will be filed on the exchange’s Investor Complaint Form, doubtless to no effect at all. After all, if the gummy old dogs at FINRA Regulation-Amex division can’t even be bothered tracking down this (or these) sly fox (or foxes), they’re hardly likely to be bothered by just another attempted assault on Trinity Place.

Lesson: Caveat bloody emptor, especially if your odd-lot finds its way to TWMUSC™.

Pedant’s Note: FXP does not, of course, target double the inverse return of FXI; it targets double the inverse return of the underlying FTSE-Xinhua China 25 index. Needless to say, one or other, or perhaps both, settled somewhat adrift on Friday.