Mt Gox is run in such amateurish way, it's appalling.
In real life, with many brokers you trade doesn't close in 3 days and as such you can't withdraw proceeds from the trade for 3 days (but you can use the proceeds to continue trading).
In this situation Mt Gox is effectively both exchange and the broker. Not to have rule in place to block funds from recent transactions is like people who designed it never traded real stock with real brokers.
I blame hubris. Bitcoin is an enterprise where tech-focused people think they have a better (or at least equivalent) solution than what decades or centuries of economics and finance or whatever have come up with. An over-focus on its legitimate advantages and their own abilities ends up blinding people like this to the lessons of experience from the old model and from domain experts. In a very real sense, because they're convinced it's better and that they know what they need to know from economics and finance and banking, they're going to keep making the mistakes that the people they're replacing solved long ago.
And this isn't a fraud prevention measure, it's a legacy of the days when settlement included someone carting a stack of stock certificates from one bank's vault to another.
Lastly, most traders trade on a contractual basis, not a settlement basis, so their trades are considered binding as soon as the agreement is in place.
1. In the US, most exchange operators are the counter-parties to all trades. They also interact with settlement and clearing services that ensure the verification of proper ownership and conveyance of securities. In the old days, something like a third of all trades failed to meet the three-day window because some part of this process would fail.
2. There are very very specific rules regarding how the orders are crossed (buy and sell side) and which orders take precedence in the (limit order) book. It looks like the MtGox guys didn't think this through and the trader in question took advantage of this naivete on the part of MtGox.
3. Most exchanges are "brokered" to facilitate trades while MtGox is more like a swap-meet. Brokered exchanges are more expensive to trade in but they have the advantage that brokers can "know" how to get price-improvement based on market conditions. In short, they are "informed traders" vs the "uninformed traders" you see in most post/notice markets. When the informed meet the uninformed, you see situations like this where someone takes the whole shebang home.
Personally, I find it amusing that the Bitcoin fanboys are clamoring for intervention here. It's almost like they are getting to the idea that a strong regulatory environment is a /good/ thing for the free market. If this were the cryptopunk/libertarian paradise that everyone dreams of for Bitcoin, there would be /no/ recourse.
The real problem is that the market was able to descend to that level to begin with. There should have been some sort of circuit breaker limits in the Mt. Gox system that would have halted such a massive decline, similar to what exist in the US equity and futures markets.
As to #3, really the only thing that matters in terms of exchange access in the US is that you satisfy the appropriate compliance burdens (broker-dealer status) and can pay the fees required for naked access. That may be good selection criteria for "informed traders" but it certainly isn't any guarantee.
As for #3, naked access is a relatively new invention and the rules are sufficiently constructed to virtually guarantee that only implicitly informed parties are ever going to see "naked" access.
Circuit breakers (actually the lack of them) is one of those things that enabled this to occur. The party in question essentially copied a strategy that was used by the HFT guys to soak up the offer. The seller got liquidity but it came at a very dear price.
And that's really the issue here: circuit breakers are a compromise between liquidity and price discovery. If the exchange suddenly sees that price discovery is trending outside of a range, they shut down trading. If the problem is a systemic market one, then this probably is a good idea. But if price movement is because of new information, then all the circuit breakers in the world wont help you because as soon as trading resumes, the new regime will be in play.
The problem is that the entire Bitcoin model has the same weakness. There's no rule for rolling back a bitcoin transaction because there couldn't be such a single authority because bitcoin is merely a "decentralized" algorithm.
This illustrate one of the inherent problems of Bitcoin. Any currency system today must be based not on simple transfers but on valid transactions. Valid transactions require that there exists an authority to validate those transactions.
Real world brokers though have settlement period for releasing funds for exactly this reason - so the transaction could be rolled back if necessary.
If you're real world is drug sales in a shady corner somewhere, that might be true.
Elsewhere, we have this thing called the "legal system" which actually exists primarily to enforce something called a "contract", which is essentially a transaction.
... and getting everyone to agree to the rollback might be difficult.
... and considering you would be using the state's court system, the state feel like refusing to use their money wasn't very generous. IE, if the Feds could sink bitcoin transactions just by saying they wouldn't engage in any Fraud protection on them.