Multi-price Flipping. Rotter?
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Eurex To Refer Unusual Futures Trades To Germany's Bafin
By Adam Bradbery
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--German-Swiss futures market Eurex AG has identified unusual trading activity in some of its futures contracts in November and plans to notify German markets regulator Bafin, the exchange said Wednesday. The unusual activity is similar to the flip trades which an independent trader who subsequently became known as "the flipper" executed in bond futures on the exchange in 2004, according to a market participant familiar with the matter. The flipper's trades involved entering large buy or sell orders into the market before wrong-footing other traders by pulling the order and entering an order to do the opposite. "Following signals of unusual trading activity in the first two weeks in November, the Eurex trading surveillance office investigated the situation and established that although it was in line with Eurex's rules and regulations, there were unusual trading patterns," Eurex said in a prepared statement. "For this reason, the trading surveillance office will pass the investigation to the federal financial supervisory authority (BAFIN)," the exchange said. Eurex, which is owned by Deutsche Boerse AG (DB1.XE) and Swiss Exchange, wouldn't say which of its members executed the unusual trades or whether more than one member was involved. One market participant familiar with the matter said the unusual trades only took place in Eurex bond contracts. A Bafin spokeswoman said the regulator hasn't been notified of unusual trading activity on Eurex. Eurex is obliged to notify Bafin of any unusual trading activity that it suspects could be viewed as market manipulation or insider dealing. The futures exchange decided the original flipper trades in 2004 didn't break any of the exchange's rules or regulations but referred them to Bafin. In those trades, the flipper would, for instance, buy bond futures at ever increasing prices until a final large order would encourage other traders to enter bid orders to take advantage of market momentum. This provided ready bids for the flipper when he pulled his buy order and started selling to take profits. In June 2004, Eurex reduced the tick size - or minimum price movement - of its two-year Schatz futures and options contracts which made it harder for the flipper to make money from this strategy and this caused the activity to fizzle out.
-By Adam Bradbery, Dow Jones Newswires; 44 20 7842 9305;
adam.bradbery@dowjones.com
(END) Dow Jones Newswires
043: December 06, 2006 06:56 ET (11:56 GMT)
By Adam Bradbery
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--German-Swiss futures market Eurex AG has identified unusual trading activity in some of its futures contracts in November and plans to notify German markets regulator Bafin, the exchange said Wednesday. The unusual activity is similar to the flip trades which an independent trader who subsequently became known as "the flipper" executed in bond futures on the exchange in 2004, according to a market participant familiar with the matter. The flipper's trades involved entering large buy or sell orders into the market before wrong-footing other traders by pulling the order and entering an order to do the opposite. "Following signals of unusual trading activity in the first two weeks in November, the Eurex trading surveillance office investigated the situation and established that although it was in line with Eurex's rules and regulations, there were unusual trading patterns," Eurex said in a prepared statement. "For this reason, the trading surveillance office will pass the investigation to the federal financial supervisory authority (BAFIN)," the exchange said. Eurex, which is owned by Deutsche Boerse AG (DB1.XE) and Swiss Exchange, wouldn't say which of its members executed the unusual trades or whether more than one member was involved. One market participant familiar with the matter said the unusual trades only took place in Eurex bond contracts. A Bafin spokeswoman said the regulator hasn't been notified of unusual trading activity on Eurex. Eurex is obliged to notify Bafin of any unusual trading activity that it suspects could be viewed as market manipulation or insider dealing. The futures exchange decided the original flipper trades in 2004 didn't break any of the exchange's rules or regulations but referred them to Bafin. In those trades, the flipper would, for instance, buy bond futures at ever increasing prices until a final large order would encourage other traders to enter bid orders to take advantage of market momentum. This provided ready bids for the flipper when he pulled his buy order and started selling to take profits. In June 2004, Eurex reduced the tick size - or minimum price movement - of its two-year Schatz futures and options contracts which made it harder for the flipper to make money from this strategy and this caused the activity to fizzle out.
-By Adam Bradbery, Dow Jones Newswires; 44 20 7842 9305;
adam.bradbery@dowjones.com
(END) Dow Jones Newswires
043: December 06, 2006 06:56 ET (11:56 GMT)
Don't trade when he is active, if whoever it is trades say 10% of bund volume that leaves about 900,000 contracts a day trading that he isn't part of. Learn to identify these spots where the guy is active and just sit on your hands. Sometimes the best trade is to not trade. Have learned this sitting in the 10yr where flipping can turn into someone getting smoked on a 7000 lot. Nothing the guy does is illegal, it is just someone taking out small locals that lean on price levels when there is no real paper in the market. Yes there are risks if he has the book stacked and gets run over, but that comes with the territory.
Well, I´m for 16 years - since opening of DTB ( Deutsche Terminboerse - now EUREX ) - in the BUND/BOBL/SCHATZ/DAX markets and I can tell you that PR is just doing what every trader is dreaming of : influencing the markets. So what ? As long as he´s the guts and nobody else of the so-called profs hold out against him he will be always the winner. Anyway : a respected trader for example in the BUNDS is one who had once or more times at least an open position of 10 K lots or more. Everybody else in this market is just wishy-washy !
Regards
Jose
Regards
Jose
Quote from Joma:
Well, I´m for 16 years - since opening of DTB ( Deutsche Terminboerse - now EUREX ) - in the BUND/BOBL/SCHATZ/DAX markets and I can tell you that PR is just doing what every trader is dreaming of : influencing the markets. So what ? As long as he´s the guts and nobody else of the so-called profs hold out against him he will be always the winner. Anyway : a respected trader for example in the BUNDS is one who had once or more times at least an open position of 10 K lots or more. Everybody else in this market is just wishy-washy !
Regards
Jose
Well said!
I heard a rumour that Eurex were referring some of the "flipping" practices to Bafin. I'm not sure whether that would include the recent activity, but if the rumour is true then it is possible that the traders responsible have been spooked a little.
It would be a shame if they have indeed been referred.
It would be a shame if they have indeed been referred.