Had just opened a CSCO earnings related single contract short at 846 without a stop loss. So, as you can imagine, I disagree strongly with those posters mentioning to always have a stop! Most reasonable stops would have cemented in a big loss so I have problems with the 860 cutoff. I think I would require all trades to be broken from the start of the event. Between where I am, say, and the 860 it's going to be an awful mess to get indemnity from the pin head that set this off if that's what the plan is (someone said). In the final analysis, the exchange must try to get as close to fair as it can or die a horrific death at the hands of lawyers. Of that much I am certain.:eek: Geo.
In my opinion, people often gripe whenever they get a chance to. There was a problem with globex and CME dealt with it in a timely and fair method. Yes 860 is arbitrary.. but still very reasonable.
RE> I closed all my positions late in the afternoon, but as i was doing some end of the day charting, i heard Ben Litchenstein yelling thru the squawk quotes, saying: "Holy shit, what da heck is that?" "Did you see that Steve? Did you see that?" then it happened ............ I was listening to Ben as I was the only one left in our trading room just cleaning up and I almost fell out of my chair when he started yelling and going off and then I loked at me ES chart and WHOAAAAA I thought we'd gone to war or something like that as well........I'm kinda new to trading the futures and the cash had already closed and I was like on the cell phone to my mngr at once (we had no open positions but I called him anyway) I was FREAKIN out, has this ever happened before?? J-
Interesting about the possibility of automatic liquidation at IB during this fiasco. did anyone actually have that happen? I would think that a 100 point move would have triggered something, somewhere , if it was totally automatic.
CME is going to ruin their franchise if they don't do something to maintain an orderly market in the emini. With most of their income growth coming from electronic trading - their corporate results are going to be hurt if they continue scaring away traders with fiascos like today.
Floyd Norris at the New York Times wrote this article below. It can be found at the NYTimes.com website. http://www.nytimes.com/2003/02/05/business/05FUTU.html Some Trades in S.&P. Futures Are Canceled After Odd Surge By FLOYD NORRIS More than $170 million in futures trades in the Standard & Poor's 500-stock index were canceled late yesterday after the Chicago Mercantile Exchange concluded that a sudden spike that sent prices up almost 12 percent within seconds had occurred for no good reason. But many other trades that were well above market prices were allowed to stand, providing a windfall for some traders and significant losses for others. Eric Wolff, the exchange's managing director for regulatory affairs, said it was not clear what had set off the move. "The rumors that somebody did something phenomenally stupid are probably wrong," he said. "It does not look like an idiot with a single order caused this event." Instead, he said, after the market began to move, many "buy stop" orders were activated. Such orders are typically entered by traders who short the market and want to cut their losses if prices begin to rally. The big move began at 4:07:12 p.m., Eastern time, seven minutes after the New York Stock Exchange closed for the day with substantial losses but with a late rally that trimmed the decline. The big move ended 43 seconds later. The action took place in trading in so-called mini contracts for the S.& P. 500, which are one-fifth the size of normal contracts and are intended to appeal to smaller investors. Each contract is worth 50 times the S.& P. index, or about $42,000 at current prices. Within seconds, the price of the contract shot up from 847 to 948 and then fell back to 848. But the price of the larger S.& P. 500 contracts, which normally trade in tandem with the smaller ones, never rose above 854. The exchange determined that all trades more than 6 points above 854 were clearly erroneous. So it canceled trades for about 4,000 contracts at prices of 860.25 and above. But it allowed to stand trades for 398 contracts executed at prices above 854. Those contracts, valued at about $17 million, provided immediate gains for the sellers because the contract ended the day at 849.25.
I don't think the 860 level was all that arbitrary. If you look at the volume on the tick bars at a small enough resolution, I think that 860 is the level that the original 3 2,000 contract orders took the market to. There seemed to be some instability or some inflection at that level and then new players attempted a squeeze to the higher levels of 948. Of course at that time there were no sellers anywhere and the squeeze resulted in a huge secondary move. It seems the CME is making the original operator eat the cost of his mistake but taking away rewards from the squeeze players.
I was also wondering how a 2,000 lot order gets honored when the limit is supposed to be 250 or 300 or some such number?