Electronic Oil Market Trades Resumed After Halt
http://www.foxbusiness.com/news/2012/02/13/electronic-oil-market-trades-resumed-after-halt/
Published February 13, 2012
| Dow Jones Newswires
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NEW YORK â A technical glitch shut down CME Group Inc.'s (CME) electronic oil-trading platform for more than a hour Monday, throwing end-of-day trading into disarray and sending traders scrambling to place trades on the New York Mercantile Exchange floor.
The shutdown shortly after 2 p.m. EST halted electronic trading of the world's biggest benchmark oil contract and roiled what had been a relatively a quiet, low-volume session. Prices rose 50 cents a barrel from levels earlier.
The shutdown was caused by "technical issues," according to CME. The Globex trading platform resumed at 3:15 p.m. EST.
"The issue has been fixed and the market is back up and running," a CME spokesman said.
In a notice on the CME Group's website, the firm, which owns the Nymex, said it would cancel outstanding orders placed Monday on the electronic trading platform, but not completed trades.
The shutdown, which coincided with the end of the trading session, led to confusion over the final day's price of oil, called the settlement price. Front-month March crude ultimately settled up $2.24, or 2.3%, at $100.91 a barrel.
Such technical glitches are relatively uncommon for CME compared with U.S. stock exchanges, where billions of shares change hands per day--far more than the average 11.6 million contracts bought and sold on CME's markets last month.
But when hiccups strike futures trading the impact is more severe, since there are only two major venues--CME and rival IntercontinentalExchange Inc. (ICE)--for trading crude oil contracts.
Even though electronic trading ground to a halt, open outcry trading remained open. Traders on the floor of the Nymex rushed into the normally sleepy oil-futures pits, looking to place trades and take advantage of any price dislocations due to the failure of Globex, traders said.
"A bunch of options guys ran over there, nat gas brokers are there; everybody is trying to take advantage of the wide quotes and stuff," said Fred Rigolini, vice president of Paramount Options, a brokerage on the Nymex floor.
"There's a little yelling and screaming in the crude ring right now," said Jeffrey Grossman, president of BRG Brokerage on the Nymex floor, shortly after the Globex halt.
CME did not offer additional details as to the cause of the shutdown. However, an analysis of the trading halt by Nanex, a market data service, found that shortly after 2 p.m., a series of 800 to 1,000 price quotes in Nymex crude-oil futures repeated in a loop a dozen times over about four minutes. Globex shut down shortly after.
"The same block of quotes just kept getting transferred by the system," said Eric Hunsader, CEO of Nanex. "Then I think someone pulled the plug."
John Woods, a Nymex floor trader and head of JJ Woods Associates, said telephone calls from customers were twice as high as during a normal trading session, and he headed to the crude-oil pit.
In recent years, the majority of oil-futures volume has flooded to the electronic market, leaving trading thin on the Nymex floor in downtown New York. When the exchange announced the day's settlement would be computed from the floor, Woods said there were cheers and laughter.
"It was a throwback to the old days, I guess this just shows we aren't done yet," he said.
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