See below, press release from the CBOT, regrading the July 3 Mini-Dow mistrade.
Frankly, I think this is nonsense.
See this quote: "Contrary to rumors that have circulated regarding this activity, the catalyst for the market break was not an order entry error. Rather, a large sell stop order was triggered, which, upon execution, elected additional sell stops at incrementally lower prices. "
My question is simple: SO WHAT? Is this not the way the market is supposed to work. If a large sell-stop order triggers other sell stops in a cascade so be it......
What do you guys think?
**************
The Chicago Board of Trade?s Business Conduct Committee recently reviewed an investigative report prepared by the Office of Investigations and Audits regarding activity in the mini-sized *Dow futures market on July 3, 2003, and determined that there was no basis to conclude that the actions of any market participant violated Exchange rules.
On July 3, 2003, the CBOT®?ini-sized Dow futures experienced a sudden break of approximately 560 points in less than a minute. There was no economic or fundamental reason for the decline and the Exchange therefore promptly invoked its mistrade policy.
Contrary to rumors that have circulated regarding this activity, the catalyst for the market break was not an order entry error. Rather, a large sell stop order was triggered, which, upon execution, elected additional sell stops at incrementally lower prices. The cumulative effect of the cascading stops and the new sell orders entered as the market declined created an unusual order imbalance that caused the price of the mini-sized Dow to break sharply and become substantially misaligned relative to all other related markets.
Based on its review of this incident, the CBOT made several amendments to its mistrade policy to strengthen the bias toward trade certainty in mistrade scenarios and thus reduce the likelihood that trades will be invalidated. Additionally, in conjunction with the CBOT?s migration to its new electronic trading platform in November 2003, the Exchange will have additional functionality that will reduce the incidence of mistrades, as well as mitigate the impact of potential mistrades that do occur.
Questions in this regard may be directed to Dean Payton, Office of Investigations & Audits, telephone (312) 435-3658.
Paul J. Draths
Vice President and Secretary
Frankly, I think this is nonsense.
See this quote: "Contrary to rumors that have circulated regarding this activity, the catalyst for the market break was not an order entry error. Rather, a large sell stop order was triggered, which, upon execution, elected additional sell stops at incrementally lower prices. "
My question is simple: SO WHAT? Is this not the way the market is supposed to work. If a large sell-stop order triggers other sell stops in a cascade so be it......
What do you guys think?
**************
The Chicago Board of Trade?s Business Conduct Committee recently reviewed an investigative report prepared by the Office of Investigations and Audits regarding activity in the mini-sized *Dow futures market on July 3, 2003, and determined that there was no basis to conclude that the actions of any market participant violated Exchange rules.
On July 3, 2003, the CBOT®?ini-sized Dow futures experienced a sudden break of approximately 560 points in less than a minute. There was no economic or fundamental reason for the decline and the Exchange therefore promptly invoked its mistrade policy.
Contrary to rumors that have circulated regarding this activity, the catalyst for the market break was not an order entry error. Rather, a large sell stop order was triggered, which, upon execution, elected additional sell stops at incrementally lower prices. The cumulative effect of the cascading stops and the new sell orders entered as the market declined created an unusual order imbalance that caused the price of the mini-sized Dow to break sharply and become substantially misaligned relative to all other related markets.
Based on its review of this incident, the CBOT made several amendments to its mistrade policy to strengthen the bias toward trade certainty in mistrade scenarios and thus reduce the likelihood that trades will be invalidated. Additionally, in conjunction with the CBOT?s migration to its new electronic trading platform in November 2003, the Exchange will have additional functionality that will reduce the incidence of mistrades, as well as mitigate the impact of potential mistrades that do occur.
Questions in this regard may be directed to Dean Payton, Office of Investigations & Audits, telephone (312) 435-3658.
Paul J. Draths
Vice President and Secretary
, I even said it that it was not a mistake and that it will be for a big move.
