6 May

Excerpts from the speech of the head of the CME

 CME chief Terry Duffy speaks to U.S. House Commitee on Financial Services in relation 1000 firing on a preschool educational institution.

For the last 4 of the day, the exchange conducted a detailed analysis of the activity 6 May. Preliminary analysis showed, that the CME functioned without disruption. Erroneous trades in the futures markets, that could break the spot dust,not found. Also, no one among the participants in futures transactions reported erroneously executed trades; no trade was canceled as a result of the trades 6 May.

CME analyzed transaction volumes and in particular focused on activity around 1 pm-2pm CT. Total volume in E-mini S&P 6 May amounted to 5.7 million contracts, about 1.6 million or 28% traded in the referenced time period. During this hour, the market was trading in a range 1143.75-1056 or 87.75 points- beginning of the period 1142 and at the end of the period 1113. More 250 firms and 9000 users were active during this period. During most of this hour,the spread was .25 pips and the market was trading normally , despite a significant drop and rebound. Approximately at 1:45:28, after a sharp fall on 12.75 pips in about 500ms per volume 1100 Contracts, the spread for a moment parted and amounted to 6.5 points. At this moment, the CME risk management system worked( globex stop price logic event). Resulting in, the market was instantly and automatically suspended for 5 seconds , to allow liquidity to 'return to the market'. Market, respectively, opened again and the bid was 1056.50. a offer 1056.75, after which the market rallies over 40 points to 1097 during 3 minutes.

The Market Regulatory Department reviewed a huge amount of activity during the mentioned period, which contained more 3 millions of system messages and in particular those users, who were active in this period. The department did not find any anomalies on the part of market participants.

This is once again confirmed by the fact,what I wrote about earlier. I.e, NYSE suspended trading for 1.5 minutes( LPR), while other exchanges do not have this rule, including electronic, which created violations in the spot market


Nasdaq cancels trades for 6 May 2010

Nasdaq announced last night, that all bidding, taken between 14.40 And 15.00, “which passed for the amounts, on 60% more or less than the value of the financial instrument by 14.40”, will be considered invalid. “The decision cannot be appealed”, – stated in Nasdaq. The NYSE Arca will do the same.. List of shares below :

Continuing yesterday's shock

It seems to me, that NYSE is guilty to one degree or another for yesterday's collapse.
Let's say there was still a big seller for 16bn in futures yesterday. What does this volume lead to?? Of course, a large seller will lead to, that there will be a programmed sell signal on the arbitrage strategy SPX spot and futures, when arbitrage robots will sell shares in a basket in 500 Shares. It turned out to be such a discount on futures before stocks, that it seems that all robots of large houses simultaneously launched sell programs for shares, and each house has its own limits and thresholds for the volume of positions. Usually, this delta between spot and futures does not fluctuate so much., so that the programs run in such a cascade. The program can work for a short time and immediately lies, since delta immediately reverts to fair value. FAir value(premium), by the way, there is a difference between spot and futures.
Such arbitration transactions used to be up to 50% on the NYSE and basically everything goes well. What happened this time.!? Yes, big size of futures came, Yes- program selling went ,and the NYSE, seeing such a situation and not finding the necessary liquidity on bids, decided to slow down trading for 1.5 minutes and therefore the whole blow fell on the electronic markets, where liquidity is usually not always available. and then there is the additional load due to the NYSE shutdown.!!!!
NYSE then declares , that supposedly how important it is to have an auction market, they say the electronic market is to blame due to the lack of a human factor. So if they hadn't passed out, then there was no such fall. Disable liquidity pool , then, of course, another exchange will not cope. If you look at the list of canceled trades, then they are mainly on the NYSE exchange. Because the , when they went offline on other exchanges, the price was trading at zero( conditionally) .
media.globenewswire.com/cache/6948/file/8211.htm

In this way , these are echoes of the old NYSE AND NASDAQ war.
In general, I am in favor of the consolidation of exchanges by asset type. There is no need to have multiple exchanges in one country, trading the same instrument. Create fragmentation, arbitration and technical issues.

And so, in principle, the fall should have happened and it happened. As always, there are external factors, which create a domino effect. If it's too sunny, then something is sure to happen. The market does not forgive complacency!!!!

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