3rd UPDATE: Electronic Oil Market Trades Resumed After Halt
February 13 2012 - 5:29PM
Dow Jones News
A technical glitch shut down CME Group Inc.'s (CME) electronic
oil-trading platform for more than a hour Monday, throwing
end-of-day trading into disarray and sending traders scrambling to
place trades on the New York Mercantile Exchange floor.
The shutdown shortly after 2 p.m. EST halted electronic trading
of the world's biggest benchmark oil contract and roiled what had
been a relatively a quiet, low-volume session. Prices rose 50 cents
a barrel from levels earlier.
The shutdown was caused by "technical issues," according to CME.
The Globex trading platform resumed at 3:15 p.m. EST.
"The issue has been fixed and the market is back up and
running," a CME spokesman said.
In a notice on the CME Group's website, the firm, which owns the
Nymex, said it would cancel outstanding orders placed Monday on the
electronic trading platform, but not completed trades.
The shutdown, which coincided with the end of the trading
session, led to confusion over the final day's price of oil, called
the settlement price. Front-month March crude ultimately settled up
$2.24, or 2.3%, at $100.91 a barrel.
Such technical glitches are relatively uncommon for CME compared
with U.S. stock exchanges, where billions of shares change hands
per day--far more than the average 11.6 million contracts bought
and sold on CME's markets last month.
But when hiccups strike futures trading the impact is more
severe, since there are only two major venues--CME and rival
IntercontinentalExchange Inc. (ICE)--for trading crude oil
contracts.
Even though electronic trading ground to a halt, open outcry
trading remained open. Traders on the floor of the Nymex rushed
into the normally sleepy oil-futures pits, looking to place trades
and take advantage of any price dislocations due to the failure of
Globex, traders said.
"A bunch of options guys ran over there, nat gas brokers are
there; everybody is trying to take advantage of the wide quotes and
stuff," said Fred Rigolini, vice president of Paramount Options, a
brokerage on the Nymex floor.
"There's a little yelling and screaming in the crude ring right
now," said Jeffrey Grossman, president of BRG Brokerage on the
Nymex floor, shortly after the Globex halt.
CME did not offer additional details as to the cause of the
shutdown. However, an analysis of the trading halt by Nanex, a
market data service, found that shortly after 2 p.m., a series of
800 to 1,000 price quotes in Nymex crude-oil futures repeated in a
loop a dozen times over about four minutes. Globex shut down
shortly after.
"The same block of quotes just kept getting transferred by the
system," said Eric Hunsader, CEO of Nanex. "Then I think someone
pulled the plug."
John Woods, a Nymex floor trader and head of JJ Woods
Associates, said telephone calls from customers were twice as high
as during a normal trading session, and he headed to the crude-oil
pit.
In recent years, the majority of oil-futures volume has flooded
to the electronic market, leaving trading thin on the Nymex floor
in downtown New York. When the exchange announced the day's
settlement would be computed from the floor, Woods said there were
cheers and laughter.
"It was a throwback to the old days, I guess this just shows we
aren't done yet," he said.
-By Jerry A. DiColo and Dan Strumpf, Dow Jones Newswires;
212-416-2155; jerry.dicolo@dowjones.com
--Jacob Bunge contributed to this article
CME (NASDAQ:CME)
Historical Stock Chart
From May 2024 to Jun 2024
CME (NASDAQ:CME)
Historical Stock Chart
From Jun 2023 to Jun 2024