Question
The following processes and procedures may reduce fat finger errors: Set limits : Firms can minimize fat-finger trading errors by setting up filters on their
The following processes and procedures may reduce fat finger errors:
- Set limits: Firms can minimize fat-finger trading errors by setting up filters on their trading platforms. A filter could be established to prevent a trade from getting placed if it's above a specific dollar or volume amountfor example, if an order is over $2 million or 500,000 shares.
- Authorization: Requiring authorization for trades that are over a specified amount can reduce fat finger errors. For instance, a securitiesfirm might require that the head trader has to authorize and release trades that exceed $500,000.
- Automation: Using trading algorithms and straight-through processing to enter orders minimizes the risk of fat-finger errors. Manually placing a large number of orders over a trading day can be tedious, increasing the likelihood of mistakes. Orders that feed directly into the firm's trading system reducethe risk of human error.
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