CME changes rules on errors in stock/forex e-trade
8/30/02 2:36 PM
Source: Reuters
CHICAGO, Aug 30 (Reuters) - The Chicago Mercantile Exchange will take away some of the opportunity to make human errors in electronic trading of foreign exchange futures, but at the same time require stock index futures traders to take responsibility for larger mistakes.
The exchange has found mistakes are only a keystroke away in electronic trading, and it has refined trading rules to reduce the chance of making errors in currency trading, possibly reducing interruptions to trading caused while they are sorted out.
The exchange said on Friday it will narrow the range of prices that can be entered for electronic trade in foreign exchange futures to make it harder to key in incorrect buy or sell orders on the exchange's electronic platform, Globex.
It will also widen the price range in which traders are not allowed to challenge electronic trading mistakes in its volatile stock index futures contracts.
Both rules are effective Sept. 1.
A wider "no-bust range" for stock index futures and tighter price bands on forex futures contracts reduce the opportunity for human error on the electronic system, said John Restivo, director of Globex control for the exchange.
"This is really fine-tuning to maximize the ability to trade without interruptions," Restivo said.
The widening of the no-bust ranges and the application of tighter price bands on the forex futures are not tied to the problems the electronic trading platform had earlier in the summer handling record volume, an exchange spokesman said.
The no-bust range for contracts traded on Globex will widen to 6 points or less from 4 points in the Standard & Poor's 500 index futures and to 20 points from 16 in the Nasdaq 100 futures, the CME said.
The exchange prevents entry of orders outside a predetermined based on the last sale in forex futures. The new price band for September Japanese yen futures would be plus or minus 1.1 percent, or $0.000090 if the contract were trading at $0.008346, compared with the old range allowed at $0.000200.
Most electronic trade errors happen during thin Asian and European trading hours, and the majority of mistakes are in less liquid areas such as options, where a wider spread may be found, he said. There are few bust-able trades in liquid markets such as the S&Ps and the Nasdaq 100s, Restivo said. |
