A killing on Wall Street? Sounds like a good idea

Rico says he meant an actual killing (of a few stock brokers, say), but Julie Creswell has an article in The New York Times about the other kind:

Someone on Wall Street just made a killing. That was the subject of much chatter among professional investors, once the smoke cleared from the sudden panic and recovery on Thursday that briefly knocked some stocks down to a penny or two a share. Who had kept his cool during those terrifying minutes and scooped up some dreamlike bargains? The answer to that question is as elusive as the causes of the rout itself, because the shock rippled across so many markets in so short a time. Stock exchanges and regulators were still sorting through billions of transactions on Friday. One thing, however, is certain: by luck, savvy, lightning speed, or all three, there was money— gobs of it— to be made from the bargains that came and went in an instant.
On Friday the blogosphere was alight with conspiracy theories suggesting that perhaps the whole thing had been instigated by a big bank or a hedge fund looking to make a quick profit. As outlandish as that speculation might be, some investment pros surely made a fortune from the trillion-dollar market swing. “Somebody got Accenture at a penny. They’re ready to announce their retirement,” joked Daniel Seiver, a finance professor at San Diego State University.
For at least some of the winners, however, retirement may have to wait. On Friday, several large United States exchanges said that, although their trading platforms functioned properly on Thursday, they were nonetheless canceling many trades made during the market’s Big Bounce. Those cancellations applied only to company stocks that were affected directly by apparent malfunctions in computer systems that feed trades into the exchanges. Bets made on the periphery of the financial universe will stand. Investors who owned gold or United States Treasuries, for example, saw big gains as global investors sought havens.
But even those gains were small compared with those won by options traders who had placed bets on an index that rises in value when volatility increases in American equity markets. “The guys who probably made the most money in this were options players,” said Larry Tabb, chief executive of the Tabb Group, a financial services consulting firm.
Another group of likely winners in the eye-blink rout were investors who had placed “limit orders” on certain stocks. These are orders to buy shares at a fixed price that is often well below where the stock is currently trading. As the selling accelerated Thursday in the computer-driven frenzy, those orders were filled at prices that might have once seemed implausible.
“There are a whole other group of folks who play this game,” Mr. Tabb said. “They put low limit orders into the market for this exact purpose, for when the markets go into free fall.”
Hedge funds, high-frequency traders, and even individuals with an online trading account who had existing low limit orders in place, could have snapped up bargains as the bottom fell out of the markets. Unfortunately for those investors, the exchanges have rules in place to cancel or rescind any trades that are associated with erroneous or unusual trading activity.
“If there is an order that gets printed and it is so far away from the market that it was clearly wrong, the exchanges have the right to break it and, in fact, they do it fairly often,” Mr. Tabb said. “It just doesn’t happen with this magnitude.”
On Friday, the NASDAQ market said it would cancel all trades that had occurred in the twenty-minute period between 2:40 p.m. and 3 p.m. on Thursday that were sixty percent higher or lower than the last trade at 2:40. “This decision,” the exchange noted on its Web site, “cannot be appealed.”

Rico says the markets clawing back potentially bogus transactions is a great idea, though it will undoubtedly piss off those who thought they'd made a killing...