trade bust by exchange^swap-dealer

Trade bust is rare on real exchanges, usually for some extreme scenarios.

It’s more common in a equity swap dealer system than an agency broker system. Assuming a buy, there are two transactions:

  1. client leg: contract between dealer and client, client buying IBM from dealer
  2. exchange leg: regular buy on nyse.

After a swap trade is executed i.e. after the hedge order has been executed on nyse, the dealer can bust the client leg. So for the time being there’s only the hedge position on the dealer’s book — risky. Now dealer will execute another client leg transaction at a new price.

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