spike in volume during the time range of the settlement price

Discussion in 'Commodity Futures' started by ciccio, Nov 15, 2016.

  1. ciccio

    ciccio

    For what reason the CME energy products have a spike in volume between 14:28:00 and 14:30:00 ET?
    During these two minutes the daily settlement price gets calculated but it does not look to me that this fact alone can justify an increase in volume so big.
    By chance during this time range does a price fixing or any other data gets published to cause a spike in volume?
    Thank you for your help.
     
  2. TraDaToR

    TraDaToR

    It can be options traders who like to hedge their deltas at what will be the settlement of the day or something similar to "the hammer", the algorithm used by Optiver, for which they were fined by CFTC.
    They accumulated Trade At Settlement contracts during the day( at bid or ask ), and then started liquidating their large position in the regular market just 2 minutes before the settlement window, so that they ended up averaging a slightly better price for their exit than the settlement they drove up or down( and was actually their entry price because of the TAS nature).
     
    ciccio likes this.
  3. ciccio

    ciccio

    I think you are right, the spike in the volume during the settlement period is probably due to the Trading At Settlement (TAS) orders. Thank you for your help.