it is total bullshit.
no one in the industry takes it seriously.... unless of course, they're idiots.
no one in the industry takes it seriously.... unless of course, they're idiots.
FlashCrash Report
- Thread starter Don Bright
- Start date
Appears this "mutual fund complex" violated CME's position limit rules for S&P: 20,000 net long or short in all contract months combined.
"At 2:32 p.m., against this backdrop of unusually high volatility and thinning liquidity, a large fundamental trader (a mutual fund complex) initiated a sell program to sell a total of 75,000 E-Mini contracts (valued at approximately $4.1 billion) as a hedge to an existing equity position."
Doesn't really matter much. They get slapped with a warning letter and a $25K fine. They really think a $25k fine payable to the exchange on a $4B transaction is a penalty.
CME Rules Excerpts
35102.D. Position Limits 5
A person shall not own or control more than 20,000 contracts net long or net short in all contract months combined. For positions involving options on Standard and Poor's 500 Stock Price Index futures, this rule is superseded by the option speculative position limit rule.
35102.E. Accumulation of Positions 6
For the purposes of this rule, the positions of all accounts directly or indirectly owned or controlled by a person or persons, and the positions of all accounts of a person or persons acting pursuant to an expressed or implied agreement or understanding, and the positions of all accounts in which a person or persons have a proprietary or beneficial interest, shall be cumulated.
443. POSITION LIMIT VIOLATIONS
The Market Regulation Department and the BCC shall have the authority to enforce the position limit rules of the Exchange. For purposes of this rule, any positions in excess of those permitted under the rules of the Exchange shall be deemed position limit violations. Additionally, any person making a bid or offer that would, if accepted, cause such person to exceed the applicable position limits shall be in violation of this rule.
If a position exceeds position limits as a result of an option assignment, the person who owns or controls such position shall be allowed one business day to liquidate the excess position without being considered in violation of the limits. Additionally, if, at the close of trading, a position that includes options exceeds position limits when evaluated using the delta factors as of that dayâs close of trading, but does not exceed the limits when evaluated using the previous dayâs delta factors, then the position shall not constitute a position limit violation. A clearing member shall not be in violation of this rule if it carries positions for its customers in excess of the applicable position limits for such reasonable period of time as the firm may require to discover and liquidate the excess positions. For the purposes of this rule, a reasonable period of time shall generally not exceed one business day.
A customer who exceeds the position limits as a result of maintaining positions at more than one clearing member shall be deemed to have waived confidentiality regarding his positions and the identity of the clearing members at which they are maintained. A clearing member carrying such positions shall not be in violation of this rule if, upon notification by the Market Regulation Department, it liquidates its pro-rata share of the position in excess of the limits or otherwise ensures the customer is in compliance with the limits within a reasonable period of time.
443.A.First Violation
The first occurrence of a position limit violation shall result in a warning letter issued by the Market Regulation Department to the party in violation of the limit, with a copy provided to the carrying clearing member(s). In circumstances where the carrying clearing member has also committed a position limit violation as set forth in this rule by carrying such positions, a warning letter will be issued to the clearing member(s).
443.B.Second Violation, Sanctions and Appeals
A second position limit violation by a nonmember customer within 24 months of the issuance of a warning letter shall result in the imposition of an automatic fine by the Market Regulation Department to the nonmember customer as set forth below. Such fines will be payable to the Exchange by the clearing member(s) carrying the nonmember customerâs account(s).
A second position limit violation by a member or member firm within 24 months of the issuance of a warning letter shall result in the imposition of an automatic fine by the Market Regulation Department to the member or member firm as set forth below and the issuance of a cease and desist order.
The automatic fine for a position exceeding the applicable limit by up to 25% shall be $5,000. The automatic fine for a position exceeding the applicable limit by more than 25% shall be $15,000.
Parties may, within 10 business days of being provided notice of sanctions issued pursuant to this section, request an appeal to a Panel of the Business Conduct Committee (âBCC Panelâ).
Upon receiving a written request for appeal, the Chairman of the BCC Panel shall determine whether there is a reasonable basis to conclude that the appellant might be able to meet one of the standards identified below that would permit the BCC Panel to set aside, modify or amend the appealed decision. The BCC Chairmanâs determination shall be based solely upon the written request for appeal and any written response of the Market Regulation Department. The BCC Chairmanâs determination of whether to hold a hearing on an appeal shall be final. If the BCC Chairman grants the appellantâs request for a hearing, the chairman shall allow the filing of briefs in connection with the appeal.
The BCC Panel hearing the appeal shall not set aside, modify or amend the appealed decision unless it determines by a majority vote that the decision was:
A. Arbitrary, capricious, or an abuse of the Market Regulation Departmentâs discretion;
B. In excess of the Market Regulation Departmentâs authority or jurisdiction; or
C. Based on a clearly erroneous application or interpretation of Exchange rules. The BCC Panel shall issue a written decision which shall include a statement of findings with respect to the decision from which the appeal was taken and the Panelâs determination that such initial decision is affirmed, set aside, modified or amended in whole or in part and, with respect to any initial decision that is not affirmed in whole, the BCC Panelâs determination of the order or
penalty to be imposed, if any, and the effective date. The decision of the BCC Panel shall be final and may not be appealed.
443.C.Referral to the Probable Cause Committee
Any third or subsequent position limit violation within 24 months of the issuance of a warning letter period shall be referred by the Market Regulation Department to the PCC for consideration of the issuance of charges. Additionally, notwithstanding Sections A. and B. of this rule, the Market Regulation Department, in its sole discretion, may refer any position limit violation
"At 2:32 p.m., against this backdrop of unusually high volatility and thinning liquidity, a large fundamental trader (a mutual fund complex) initiated a sell program to sell a total of 75,000 E-Mini contracts (valued at approximately $4.1 billion) as a hedge to an existing equity position."
Doesn't really matter much. They get slapped with a warning letter and a $25K fine. They really think a $25k fine payable to the exchange on a $4B transaction is a penalty.
CME Rules Excerpts
35102.D. Position Limits 5
A person shall not own or control more than 20,000 contracts net long or net short in all contract months combined. For positions involving options on Standard and Poor's 500 Stock Price Index futures, this rule is superseded by the option speculative position limit rule.
35102.E. Accumulation of Positions 6
For the purposes of this rule, the positions of all accounts directly or indirectly owned or controlled by a person or persons, and the positions of all accounts of a person or persons acting pursuant to an expressed or implied agreement or understanding, and the positions of all accounts in which a person or persons have a proprietary or beneficial interest, shall be cumulated.
443. POSITION LIMIT VIOLATIONS
The Market Regulation Department and the BCC shall have the authority to enforce the position limit rules of the Exchange. For purposes of this rule, any positions in excess of those permitted under the rules of the Exchange shall be deemed position limit violations. Additionally, any person making a bid or offer that would, if accepted, cause such person to exceed the applicable position limits shall be in violation of this rule.
If a position exceeds position limits as a result of an option assignment, the person who owns or controls such position shall be allowed one business day to liquidate the excess position without being considered in violation of the limits. Additionally, if, at the close of trading, a position that includes options exceeds position limits when evaluated using the delta factors as of that dayâs close of trading, but does not exceed the limits when evaluated using the previous dayâs delta factors, then the position shall not constitute a position limit violation. A clearing member shall not be in violation of this rule if it carries positions for its customers in excess of the applicable position limits for such reasonable period of time as the firm may require to discover and liquidate the excess positions. For the purposes of this rule, a reasonable period of time shall generally not exceed one business day.
A customer who exceeds the position limits as a result of maintaining positions at more than one clearing member shall be deemed to have waived confidentiality regarding his positions and the identity of the clearing members at which they are maintained. A clearing member carrying such positions shall not be in violation of this rule if, upon notification by the Market Regulation Department, it liquidates its pro-rata share of the position in excess of the limits or otherwise ensures the customer is in compliance with the limits within a reasonable period of time.
443.A.First Violation
The first occurrence of a position limit violation shall result in a warning letter issued by the Market Regulation Department to the party in violation of the limit, with a copy provided to the carrying clearing member(s). In circumstances where the carrying clearing member has also committed a position limit violation as set forth in this rule by carrying such positions, a warning letter will be issued to the clearing member(s).
443.B.Second Violation, Sanctions and Appeals
A second position limit violation by a nonmember customer within 24 months of the issuance of a warning letter shall result in the imposition of an automatic fine by the Market Regulation Department to the nonmember customer as set forth below. Such fines will be payable to the Exchange by the clearing member(s) carrying the nonmember customerâs account(s).
A second position limit violation by a member or member firm within 24 months of the issuance of a warning letter shall result in the imposition of an automatic fine by the Market Regulation Department to the member or member firm as set forth below and the issuance of a cease and desist order.
The automatic fine for a position exceeding the applicable limit by up to 25% shall be $5,000. The automatic fine for a position exceeding the applicable limit by more than 25% shall be $15,000.
Parties may, within 10 business days of being provided notice of sanctions issued pursuant to this section, request an appeal to a Panel of the Business Conduct Committee (âBCC Panelâ).
Upon receiving a written request for appeal, the Chairman of the BCC Panel shall determine whether there is a reasonable basis to conclude that the appellant might be able to meet one of the standards identified below that would permit the BCC Panel to set aside, modify or amend the appealed decision. The BCC Chairmanâs determination shall be based solely upon the written request for appeal and any written response of the Market Regulation Department. The BCC Chairmanâs determination of whether to hold a hearing on an appeal shall be final. If the BCC Chairman grants the appellantâs request for a hearing, the chairman shall allow the filing of briefs in connection with the appeal.
The BCC Panel hearing the appeal shall not set aside, modify or amend the appealed decision unless it determines by a majority vote that the decision was:
A. Arbitrary, capricious, or an abuse of the Market Regulation Departmentâs discretion;
B. In excess of the Market Regulation Departmentâs authority or jurisdiction; or
C. Based on a clearly erroneous application or interpretation of Exchange rules. The BCC Panel shall issue a written decision which shall include a statement of findings with respect to the decision from which the appeal was taken and the Panelâs determination that such initial decision is affirmed, set aside, modified or amended in whole or in part and, with respect to any initial decision that is not affirmed in whole, the BCC Panelâs determination of the order or
penalty to be imposed, if any, and the effective date. The decision of the BCC Panel shall be final and may not be appealed.
443.C.Referral to the Probable Cause Committee
Any third or subsequent position limit violation within 24 months of the issuance of a warning letter period shall be referred by the Market Regulation Department to the PCC for consideration of the issuance of charges. Additionally, notwithstanding Sections A. and B. of this rule, the Market Regulation Department, in its sole discretion, may refer any position limit violation
60 Minutes > Tonight > 10/10/10
How Speed Traders are Changing Wall Street Steve Kroft Gets A Rare Look Inside the Secretive World of "High-Frequency Trading"
Quote from stockwrangler:
60 Minutes > Tonight > 10/10/10
How Speed Traders are Changing Wall Street Steve Kroft Gets A Rare Look Inside the Secretive World of "High-Frequency Trading"
That was boring. Nothing new in that report.
No , nothing new to you, but maybe mom and pop got an earful.
While they did highlight colocation, I don't think they made it clear enough , that getting the data a few milliseconds early is the same as getting it 10 seconds early.
hft scum like to talk about milliseconds as if that small amount of time was beneath dealing with and worrying about. Obfuscation at it's best.
That they will pay nearly anything to obtain that edge, well, they just like to help out the exchanges, who clearly need the money.
While they did highlight colocation, I don't think they made it clear enough , that getting the data a few milliseconds early is the same as getting it 10 seconds early.
hft scum like to talk about milliseconds as if that small amount of time was beneath dealing with and worrying about. Obfuscation at it's best.
That they will pay nearly anything to obtain that edge, well, they just like to help out the exchanges, who clearly need the money.