Beware when trading eCBOT

P

Punamytsike

The Chicago Board of Trade (CBOT® ) takes great pride of their contribution to the needs of meet the needs of a growing global economy in form of a long history of electronic trading platforms. Not disputing the virtues of electronic trading here's what happened with CBOT electronically traded silver market Fri., April 21

Time & Sales is available at http://cbot.com/cbot/pub/page/0,3181,874,00.html
records from this file
Date Symbol Contract Price Time Volume
4/21/2006 ZI 6-May 12808 11:23:04 AM 1

.. it took only 122 trades & 10 seconds to take the market down 121.5 points

4/21/2006 ZI 6-May 11593 11:23:18 AM 2
4/21/2006 ZI 6-May 11700 11:23:27 AM 1 Note the 11 seconds between these 2 records!

.. and back up again only 24 seconds with only 24 contracts traded

4/21/2006 ZI 6-May 12808 11:24:42 AM 1

....
COMEX Silver declined only after Chicago clitch happened and less than 20 point !verify

For those who may assume that the eCBOT silver markets are extremely shallow and easily manipulated please take a look at the previous day -- Thu, April 20 where the metals market actually declined about as much as Friday. According to CBOT web site 96000 contracts were traded at this day!
The market continued to decline throughout the day and finally found the bottom at he middle of the night -- much longer than 10 sec. Below is the Time & Sales data (again from CBOT Dataexchange) for time of steepest decline of this market move.

Date Time Symbol Month Year TradeType Price Volume
..
20-Apr-06 8:52:22 ZI K 2006 Trade 14120 10
20-Apr-06 8:52:28 ZI K 2006 Trade 14115 1
20-Apr-06 8:52:28 ZI K 2006 Trade 14114 3
..
20-Apr-06 9:35:09 ZI K 2006 Trade 12990 1
20-Apr-06 9:35:09 ZI K 2006 Trade 12900 3
20-Apr-06 9:35:18 ZI K 2006 Trade 12940 1
..

There were 1902 trades executed between 8:52:28 and 9:35:09 total 42 minutes 41 seconds took the market down exactly the same 121.5 points

COMEX Silver market declined about the same time about the same amount.

One does not need to be a rocket scientist to realize that the eCBOT Silver market must have been manipulated 11:23:04 AM 04/21/2006 .. or there was a computer error. Calling eCBOT desk immediately after the incident they admitted that there might have been a problem and they are investigating. So far they have not announced how are they going to make good to their clients and fix the problem.

It is logical to assume that they run the same software for all of their electronic markets, hence same problem (either computer error or ... something worse) may surface elsewhere unless fixed.

Main function of an exchange is to provide stable and orderly trading environment. People do that in pit, marketmaker programs in computers. Both err some times. If the clients suffer loss then the company must take care of it. It is all based on credibility and trust. So far CBOT has not done anything to take care of their clients nor to fix what caused the problem. Whoever trades eCBOT may be next. Think, do you still trust this exchange?

Why am I writing this long story, I am currently out of more than $ 10,000.00 because of this mistake or manipulation. I am not confident that anyone is going to do anything to resolve this situation. So traders be aware…

If you feel the need to express your opinion to CBOT and, perhaps force them to fix their problem before you take a next trade here are some people that you might want to contact:

Primary Analyst and Investor Relations Contact
Tami Kamarauskas
Director, Investor Relations
141 W. Jackson Blvd
Chicago, IL 60604
Telephone: (312) 341-3439
e-mail: InvestorRelations@cbot.com

Primary Shareholder Contact
Victoria L. Pizzirulli
Associate Director, Shareholder Relations
141 W. Jackson Blvd
Chicago, IL 60604
Telephone: (312) 435-3758
e-mail: Shareholders@cbot.com
 
hello ... I have posted here ( other people too )

about this nonsense ...

I have complained for yrs to the ECBOT marketing
programming operations people ...

I have suggested that now that they are a public
entity ( symbol BOT ) on the NYSE they should
use some of their new found wealth to
provide a "plunge protection team
separate from any of their outside market makers
to be a MM of last resort

the only reason I can think of why this incident happened ( and some others too have happened )
is that it was a friday and MM's were leery of too much exposure after thursdays carnage

:(
 
Obviously you are clueless on the mechanics of electronic trade matching engines and the two sided auction market.

What type of "manipulation" do you think occurred? Do you know what cascading stops are? No matter if it's the ECBOT or GLOBEX, or EUREX, or LIFFE, if the contract amount of sell stops exceeds the lottage of the bids, the market will cascade lower. AUTOMATICALLY! In other words it's a game of musical chairs. If even a single one lot is the odd man out on the sell side, he'll offer lower and lower until another bid appears. I'm sure that was a tough break for you. But it's happened in EVERY futures market that's on the screen. ES and NQ had some 100pt moves back in 02 on the "fat finger" fallacy. I say fallacy because it's more likely cascading stops than the dim witted clerk who's absent mindedly hitting the bid repeatedly on thousand lots.
 
how come the exchanges have note found a way
to overcome this problem ?

does this mean that open outcry still has a future

of only to provide a means of price check
against the screens ?

in late Oct. 1987 ... did not people on the floor and their clerks walk away at times and the spreads widen
out too far for most people to even trade or know where markets could be quoted in equities?

I think even open outcry can have problems

I remember in 1987 ( when the precious metals last had a crazy wild day (s) of hearing of a clerk in silver who in the fury of the fast market quoted
a price or indicated a price 50 cents or $1.00 off the market and the other side refused to budge
on the big error ( discovered later ) ?

or reading of how a big local in Spoos
spooked a major HF into selling a bunch of SP500
at the lows ( in 1987 ) by offering lower
and then buying them back once the market opened ?
 
Sorry about your loss, but would you be upset if you were on the other side?

Next time you might be.

I dont think the exchange is at fault here. It's just a thin market.

All the best,

ST
 
I am really surprised by some of the replies and attitudes. I guess this is the reason that those kinds of problems still exist on the eCBOT, no one thinks that they should expect or demand better.

here is a quote from CBOT's error resolution website:

"B. In making its determination, e-cbot Operations may consider relevant factors including, but not limited to: market conditions immediately before and after the transaction; the prices of related contracts; whether one or more parties to the trade believe the trade was executed at a valid price; the extent to which the transaction appeared to trigger contingency orders and other trades; information related to the e-cbot Operations by third parties."

Too bad that they do not have to - just may consider the prices of related contracts - SI on GLOBEX for example

For those people that think that the problem was thin market, here are some more numbers:
Total ZI traded:

4 / 20 - 9108
4/21 - 5182

# of trades during the same hour when the big price movement happened during 2 minutes on Friday

4/20 809
4/21 722

So you see that about the same number of contracts were traded and although Thursday was a big bloodletting day, no extreme price movements happened then.
 
Dude, this is going to sound a bit harsh, but its true. This is what happens when you try trading a market that you shouldn't be trading anyways. I mean, we're talking about eCBOT mini gold and silver. Of course its going to move differently than a bunch of other similar contracts because its not only thin (daily volume isn't the only thing to consider when trying to determine whether its tradable), but its actually a "different" market and none of the big boys trade it. They're over there in the real contract. In my opinion, you'd be better off trading gold stocks. Much more predictable and the markets are thick. Plus, you can use your metals futures as a leading indicator.

I know a ton of big time screen-based futures traders... some guys who make $20k - $50k a day. They all trade things like the DAX, mini S&P/Q's/Russell, bonds and bund, even the dow futures are reasonable. But eCBOT mini metals? I mean....why?

I've been daytrading futures for almost 10 years and I'm pretty certain that the CBOT isn't running a trade matching engine that they feel has possible known issues? I'm pretty sure they would work overtime to fix them immediately. And I'm fairly certain that at least they think their software matches trades exactly the way they want it to; according to their exchange rules.

At the end of the day you've just found out why almost nobdy "trades" these things. My guess is that it consists primarily of swing traders and tire-kickers.

Before I traded for a living I played poker for a living. General rule of thumb when you're looking for a game is that if you're looking to make big money, then you need to find a table that has a lot of chips already on it. If you want to make big bucks in the futures market, you need to trade the markets that all the guys with money are trading. Otherwise, where is it going to come from? (I know the answer to this....its a figure of speech).
 
I lost $3000 due to this. It all happened within a minute. Please recommend a broker whcih gives access to trading on COMEX silver.. only interested in electronic trading. Currently I am trading through IB which does not offer comex silver (SI).
The commission should match that of IB.
 
Happened to me on a very liquid market ( T-Bonds).When the issue was submitted to CBOT it was ignored and never followed up.

Who cares and shut-up seems to be the prevailing attitude for decades.
 
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