Cancellation

"To err is human; to forgive, divine," says English poet Alexander Pope. Perhaps he had stock brokers in mind. Well, probably not, but they do make mistakes. For instance, you might receive a cancellation notice on a trade. This document will explain that there was an error made on some trade and detail what is being done to correct it.

As just a couple of examples, let's say Dick Doright places an order with his broker Joe Trader to buy 400 shares of Get It Right Inc. Joe is in a big hurry that day and mistakenly buys Get it Wrong Inc. Dick will receive a cancellation notice describing the error and Joe will then place the correct order. If the price of Get It Right has gone up in the meantime, Joe Trader will have to eat the difference between that and the original order.

Or let's say Joe Trader continues to have a bad day and purchases 1,000 shares of a stock for Sam Doright, instead of his requested 900. Joe will have to issue the cancellation and sell the extra 100 shares at his own expense.

Since errors are common even in the electronic age, the Securities and Exchange Commission (SEC) established rules in 2009 requiring that reviews of trades must take place within 30 minutes of the trade and be corrected within 30 minutes of the review process.