The Futures Industry Association (FIA) has published recommendations concerning the adoption of error trade procedures on derivatives exchanges.
The recommendations are based on findings from a special review committee formed last year to examine error trade policies and procedures at principal international futures exchanges.
Last November the Eurex derivatives exchange ran into controversy after it was forced to recall some 5000 futures contracts, with a value of £400 million, as a result of a misplaced order.
John Damgard, FIA president, states: "It is critical to the financial integrity of the market to have an error policy that is fair and widely understood. The committee has done an outstanding job of reviewing existing error trade procedures, talking with market participants and developing these best practices which will go a long way in insuring confidence in those markets that adopt them."
The recommendations cover price limits, defined no-bust range, timing for resolution, notice to the market, effect on other transactions and dispute resolution forums.