DJ Nymex Access Session Stalls, Resumes, Angers Gold Traders
NEW YORK (Dow Jones)--The New York Mercantile Exchange's abbreviated Access trading session Friday stalled after 10 minutes and restarted more than an hour later, but technical glitches and constraints on orders had many traders convinced the experimental session was ill-advised.
Trading of Nymex energy and metals contracts began on the exchange's Internet-based Access system at 2:30 p.m. EDT (1830 GMT) Friday, but was suspended within the first half hour when the system was overwhelmed by trading volume, Nymex spokeswoman Nachamah Jacobovits said.
Some traders voiced anger at how the opening of the session was handled, saying Comex members had an unfair advantage over non-members.
"What, at least for me, was most distressing and what (angered) my clients was that only members of Nymex could place price orders," said Leonard Kaplan, president of Prospector Asset Management in Evanston, Ill. "That's what I was told by my clearing firm. I was told that I could only place market orders."
By only accepting market orders, clearing houses force prospective buyers to buy at the lowest price bid and sell at the highest price offered, exposing them to potentially large losses, said Dave Meger, senior metals analyst at Chicago-based Alaron Trading.
"How can that be fair? I can't put a price order in? All that did was (anger) every client, every broker. It gave the Comex members an enormous advantage," Prospector's Kaplan said. "It wasn't a regular Access session. In regular Access session, you can place price orders."
For Frank McGhee, a dealer at Alliance Financial LLC in Chicago, Nymex mishandled how it started the Access system Friday.
"There were several member firms that were taking market orders only and only allowed orders after the opening, so prints above $300 were (due to an artificial order imbalance at lower prices)," he explained.
"We've never traded $300 in cash (in London) during this entire crisis," he added. "If they (Nymex officials) were being responsible, they would bust everything above $290, $291 (an ounce, basis December)."
Nymex spokeswoman Jacobovits countered that Comex member firms have the right to make any decision they want, but said she would apprise exchange officials of what happened to see if they wished to comment.
She also clarified that settlement prices Friday for gold and silver would be used as the basis for whether options on the December gold and silver contracts expire Friday in or out of the money. The settlement prices will be determined by the average of where prices trade in the final half-hour of trading, between 5:30 p.m. and 6:00 p.m. EDT (2130-2200 GMT), she added.
"It could just as easily have been Monday, set(ting) the price for options expiration based on the cash (price in London). That would have been more prudent," Alliance's McGhee said.
Nymex said it hoped to be able to offer another Access trading session Sunday, but couldn't say what time that session would begin. No decision had been made Friday evening about whether Access trading would be offered Monday. The exchange also couldn't say when regular open-outcry trading would resume, either at its building near the now-destroyed World Trade Center or at an alternate site.
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