Here we go again - Blame the futures traders
http://www.nytimes.com/2010/05/12/business/12turmoil.html?src=busln
WASHINGTON â Regulators examining the causes of the brief stock market free fall last Thursday are looking closely at heavy selling in the market for stock-index futures by a single trader, beginning 10 minutes before stock prices began to plummet.
Gary Gensler, the chairman of the Commodity Futures Trading Commission, said at a Congressional hearing on Tuesday that during that crucial time period, the futures trader, whom he would not identify, accounted for about 9 percent of trading volume in the most actively traded stock-index derivative contract, known as the 500 e-mini futures contract.
All of the traderâs orders were to sell, Mr. Gensler said, while most of the other 250 traders who were active in the same market that day were both buying and selling securities.
As the traderâs orders went through, the futures index on the Chicago Mercantile Exchange began to plummet.
The identity of the trader remained unclear. Terrence A. Duffy, executive chairman of the CME Group, which operates the Chicago exchange, said on Tuesday: âWe obviously wonât divulge that market information. We are in contact with the folks that did the trade. There is no question that it is a bona fide hedgerâ and not someone intending to disrupt the markets.
Moments after the trade, individual shares traded on markets around the country started to drop sharply, and regulators are looking at whether the trade in the futures market could have been a catalyst for the spiral.
http://www.nytimes.com/2010/05/12/business/12turmoil.html?src=busln
WASHINGTON â Regulators examining the causes of the brief stock market free fall last Thursday are looking closely at heavy selling in the market for stock-index futures by a single trader, beginning 10 minutes before stock prices began to plummet.
Gary Gensler, the chairman of the Commodity Futures Trading Commission, said at a Congressional hearing on Tuesday that during that crucial time period, the futures trader, whom he would not identify, accounted for about 9 percent of trading volume in the most actively traded stock-index derivative contract, known as the 500 e-mini futures contract.
All of the traderâs orders were to sell, Mr. Gensler said, while most of the other 250 traders who were active in the same market that day were both buying and selling securities.
As the traderâs orders went through, the futures index on the Chicago Mercantile Exchange began to plummet.
The identity of the trader remained unclear. Terrence A. Duffy, executive chairman of the CME Group, which operates the Chicago exchange, said on Tuesday: âWe obviously wonât divulge that market information. We are in contact with the folks that did the trade. There is no question that it is a bona fide hedgerâ and not someone intending to disrupt the markets.
Moments after the trade, individual shares traded on markets around the country started to drop sharply, and regulators are looking at whether the trade in the futures market could have been a catalyst for the spiral.
