Here is the CME's complete explanation

Quote from nitro:

If I remember correctly, Tandem machines have a unique feature that makes them ideal for mission critical real time operations - they can be upgraded in many ways without having to bring the machine down. For example, I believe one can add or remove RAM from the machine while the machine is running. Adding and removing cards is also a feature. I forget exactly what it was you could or could not do, but I remember being impressed.

I do not think that (m)any other box maker has this capabilities.

nitro
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For a long time the Tandem systems were the only platforms that had these capabilities and were the solution of choice for banks, exchanges etc. .... Today there are other choices from competing vendors but Tandems integration into Compaq and now the merged HP organization is a big plus IMHO for those shops that need this type of solution. HP is still the place to go for these solutions .....

On another note.... I am always surprised that the CME still has the type of systems failures that promoted this thread..... Years a go it was all too common for the floor to go dead due to a systems failure and yes, it is a shame that the news of these types of problems dont leave the floor as quickly as they should: it was always true that the floor knew about them well ahead of any dissemination outside the exchange ....However I'm not planning on going back to floor trading anytime soon ....
 
Quote from Tech Analysis:

So you hedge off with YM SPY or QQQ for Christ's sakes.

We all have backup ISPs/modems/UPS/etc for our own local failures, so why not have backup trading vehicles?

Shit happens; deal with it. Try putting up with an inept boss and coworkers 5 days a week as an alternative - this is still a great occupation.
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What I do for my traders as a remedy for this is set them up with an online excecution platform that will allow them to offsett there positions in the actual pit. Yes the customer will have to trade in multiples of 5 for this to work correctly but I only have a couple traders doing ones and twos so this isn't and issue for most of my clients.
 
Quote from OldTrader:



I have to say that the above statement bothered me.

First, let me say that I'm one of those who lost money Thursday. I'm pissed off about it.

Here's a few things that piss me off, in no particular order:

1. I noticed the system was not operating correctly. I incorrectly assumed that it was IB, and would be back up in their normal 5-15 minutes. But let's be clear about something....by the time anyone notified me regarding this outage, it was too late. But I note that the "pit" had already been notified ahead of the public, as usual, and was beginning to act on that knowledge, as usual. In other words, the playing field was not even, and the pit acted on the knowledge.

2. I don't know what fairy tale you've been reading about the 'floor'. Recent news events talking about the 'front running' going on on the NYSE. This has been going on in the futures market for years. The "Merc doesn't intentionally screw anyone"? LOL. Where you been man? They'd screw their own grandmother if there was a tick in it. Please!

3. "If you lost you're a lousy trader". You know, last time I looked, the main thing he does is buy low, sell high. And in connection with that, I will say that I've been trading for over 30 years. I can tell you that the market did not bottom in a normal fashion. And once the Globex news hit, the market turned almost on a dime and never looked back. I don't attribute that to a 'conspiracy', but the Globex outage became a technical factor which literally turned the market in a way it would not normally turn. It created buyers for futures contracts who knew there would be public buyers artificially later on. None of this has anything to do with 'trading' per se...it has to do with how quickly you got the knowledge about the outage.

4. Yes, a short ES could have been hedged. Let's say 500 shared of SPY could have been bought, margin cost of about $23K per contract hedged. If you think that every guy trading the ES has an extra $23K sitting in the account in addition to the overnight margin for a contract (each contract had to be carried), think again.

Admittedly, an easy hedging mechanism would have been the Dow contract on the ACE system, which was still functioning. Frankly, that didn't occur to me, the Dow future is so far off my horizon. Besides, keep in mind, at first various times were thrown out about when it would be back up....so depending on the reason for your position to begin with, you might not have wanted to put the hedge on for that brief period of time.

It only became clear later that Globex was not going to reopen. And by that time a good portion of the rally Thursday was already in the bag.

I closed the position Friday at a loss. It wasn't a big loss particularly, but keep in mind it was only a trade for me (not a scalp), a trade I had a profit of about 15 points from a short Wednesday, when Globex went down. This was a trade that I would have made money on in a normal course of events, except for that type of event. And further, as I've already said, I think the event changed the dynamics of the market at that time. We'll never know that for sure now though.

I think there were undoubtedly any number of small traders who were hurt by this event, and really didn't have a way to deal with the problem. I think that's too bad. If you're a truly a 'lousy trader', then you'll lose money in the end because you won't buy low sell high. But to lose money this particular way is not a function of 'trading'. I think if Globex was operating a system the way it begins to sound, these characters should have their ass kicked.

And you sir, unfortunately exhibit a lack of human compassion to call people idiots and/or lousy traders because they were hurt by malfunctioning technology. I took the time to read some of your prior posts, and noticed that this isn't the first time you've resorted to calling others idiots. This method of communication on your part really says a great deal about you....none of it favorable.

OldTrader
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Old trader I respect your post but I have to agree with the lousy trader statement. It sounds like you want something that nobody can have. All of the facts you mentioned here is old news to most on this board therfore you should be factoring all of this knowledge into your trading model.

Lets face it, if the CME is not liable for these types of outages shouldn't you have a back up plan? Offsett with a big contract and trade 5 or 10 lots.

Last but not least Compassion is for suckers, ladies, and kids. In the buisness world you will not find any. It is allways buisness when money is on the line, and I didn't just come up with this theory. You should know this.

Like I said I respect your post and my point is that you need to create a back up plan becouse the odds on this happeneing again are pretty good.

Peace,

Comp
 
Old Trader makes some good points. the action off the low that day was totally bogus. This was a screw job, plain and simple. I'm not saying the initial outage was, but the follow through had all the elements of the old boys club at the Merc taking advantage of things.

I would like to know why globex was shut down at all , since the outage apparently was not universal. And if it became necessary to shut globex, even though many if not perhaps most traders could still use it, why didn't they shut the pit too?

The "explanation" of this fiasco has all the elements of PR bullshit. 100% buzzwords and bs, no real information. Can we be totally sure that Eurex has not infiltrated the CME and is sabotaging them internally? LOL.

I think the SEC and the CFTC should have been on this that very day. Seize every e-mail and voice mail, check the phone records, immediately take depositions from everyone involved and get to the bottom of it before the official line is formulated. At the very least, there should be a rule for determining when globex will be shut. Now there is way too much room for game playing.

For the record, I lost no money that day, and didn't have a position on. I have plenty of ways to hedge this type of outage, but I must admit it never occurred to me how it would be gamed by the floor.
 
Quote from compisnada2002:



Old trader I respect your post but I have to agree with the lousy trader statement. It sounds like you want something that nobody can have. All of the facts you mentioned here is old news to most on this board therfore you should be factoring all of this knowledge into your trading model.

Lets face it, if the CME is not liable for these types of outages shouldn't you have a back up plan? Offsett with a big contract and trade 5 or 10 lots.

Last but not least Compassion is for suckers, ladies, and kids. In the buisness world you will not find any. It is allways buisness when money is on the line, and I didn't just come up with this theory. You should know this.

Like I said I respect your post and my point is that you need to create a back up plan becouse the odds on this happeneing again are pretty good.

Peace,

Comp
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Of course you're right that a backup plan is crucial, but I think you are missing his real point. First, globex charges exhorbitant fees and this type of failure is just inexcusable. They should have NASA level redundancy, but I get the impression it's about the same as a gas station uses for credit cards.

Second, it is inexcusable that they favored the floor with advance notice of what would happen. I know there is a mindset that seems to come from drinking the water in chicago that an exchange membership gives you the right to cheat and steal, but it is just criminal for them to have knowledge of when they will start the system or not and trade off that knowledge while keeping retail traders in the dark.

Again, I say this was a fiasco that has totally destroyed globex's credibility. It demands an investigation.
 
I agree with this, but my point again is that we allready know that floor traders are crooks at every exchange. And yes the CME has mirrored the exchange, but this problem is something that traders need to have a solution for. I do think that they should investigate, but what can can they realy do. Technically everybody who was trading on globex at the time kinda had the knowledge first. Wouldn't you agree? In the event that this occurrs again and a trader experiences a loss whose fault will it be the second time around if you have yet to come up with an alternative solution?

Comp

Quote from AAAintheBeltway:



Of course you're right that a backup plan is crucial, but I think you are missing his real point. First, globex charges exhorbitant fees and this type of failure is just inexcusable. They should have NASA level redundancy, but I get the impression it's about the same as a gas station uses for credit cards.

Second, it is inexcusable that they favored the floor with advance notice of what would happen. I know there is a mindset that seems to come from drinking the water in chicago that an exchange membership gives you the right to cheat and steal, but it is just criminal for them to have knowledge of when they will start the system or not and trade off that knowledge while keeping retail traders in the dark.

Again, I say this was a fiasco that has totally destroyed globex's credibility. It demands an investigation.
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The one issue that I think is unique to Old Trader's post is that, with hindsight, we now know the outage lasted the remainder of the day...But again, where was the precedent for a Globex outage that took them off line from about 10:20 (CT) until well into the late afternoon...No one really knew this was going to take that long for them to get back on-line, and while hedging was the appropriate course of action, there are so many frequent "hiccups" between what could be a temporary glitch that I believe a number of people really begin to hedge in force later in the day when it became apparent that Globex would not be back on-line, possibly until after the close...
 
Quote from vulture:

The one issue that I think is unique to Old Trader's post is that, with hindsight, we now know the outage lasted the remainder of the day...But again, where was the precedent for a Globex outage that took them off line from about 10:20 (CT) until well into the late afternoon...No one really knew this was going to take that long for them to get back on-line, and while hedging was the appropriate course of action, there are so many frequent "hiccups" between what could be a temporary glitch that I believe a number of people really begin to hedge in force later in the day when it became apparent that Globex would not be back on-line, possibly until after the close...
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Yes and this is correct. But we all know that technical issues will continue to occurr regardless of an exchanges redundancy and reagrdless of what types of theories we can come up with. In the event that ou notice another outage, that very second you should be looking to offsett or hedge. This should be added to your rules.
 
Anyone who makes a statement like "we all know the guys on the floor are a bunch of crooks" and implies a conspiracy was somehow hatched to get the off floor traders knows nothing about the CME . As I mentioned, the Merc makes $ being in operation, not being down. As for the crooks, I know a lot of them and generally they tend to be like traders everywhere. I know they were smart enough to get hedged, either long or short, when things went amiss. There should be as much indignation when someone calls a whole group of people he doesn't know a bunch of crooks as there was when I referred to those who didn't get hedged lousy traders.
 
Quote from TG:

Why don't you idiots stop complaining about the evil people at the CME who have it in for you. The floor is not going away. The Merc didn't intentionally go down to screw anyone. They make $ being open you know. That explanation of the evil pit guy and his friend, brother, etc buying or selling and hurting poor you is a bunch of crap. I know about a dozen ways you could have hedged a position if you had one when globex went down.
If you lost $ maybe you are just a lousy trader.
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Couldn't agree more. The minis are the cash cow of the CME. Why in the world would they want to shut that down? Now that they're public and the CEO has $100 Mil worth of options, earnings matter a hell of alot more than before. They didn't shut it down to hurt or help anyone.

As far as pit traders "front running" orders, wake up. Every trader in the world wants to buy before the next trader, mutual fund, and hedge fund. THAT IS WHAT TRADING IS. It's buying before everyone else wants to buy, and selling before everyone else wants to sell. Every analysis in the world is based on the concept of buying/selling before everyone else. This is what drives price movement.

This alleged "front running" included the smart traders who chose to hedge their short mini positions, as well as any off floor trader with half a brain.

Those who "assumed" that it was going to be a short glitch, consciously took the risk that it wasn't going to be a short glitch, and lost. Plain and simple.
 
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