Computer Outage Another Headache for CME
Fri Sep 20, 1:22 PM ET
By Melissa Goldfine
CHICAGO (Reuters) - Computer problems forced the Chicago Mercantile Exchange to halt electronic futures trading for nearly two hours early Friday, the latest in a series of technical problems that industry sources said may damage the system's credibility.
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The CME, the world's No. 2 futures exchange behind the Swiss-German Eurex exchange, said trading on some key equity futures contracts on the electronic platform Globex was halted at 5:15 a.m. CDT and resumed at 7 a.m. CDT.
The shutdown closed all early morning dealings in CME's actively traded futures on stock indexes during the time when Wall Street looks to the futures markets for an indication of the stock market's opening trend. Friday also marked a so-called triple witching, the simultaneous expiration of stock index futures, stock index options and individual equity options.
Globex has struggled with several difficulties in recent months, from trouble dealing with record volume to difficulty connecting customers to the platform.
"Business is booming in the futures world," said John Damgard, president of the Futures Industry Association, a group that represents the interests of various futures markets participants. "Growth is what we want and what we expect, but we certainly have to be prepared to handle it. These continued incidents are poor advertising."
The problems come at a time when trading has increasingly moved from the open outcry pits and onto computer screens, as customers clamor for the streamlined, more efficient trading expected from electronic systems.
July was Globex's busiest month ever, with trading volume hitting a record of more than 23 million contracts. Year-to-date Globex volume through August was 31 percent of CME's total volume, compared with 19 percent of total volume in the first eight months of 2001.
Friday's outage halted dealings in the actively traded Standard & Poor's 500 index futures and the Nasdaq 100 index futures. S&P and Nasdaq futures trade as full-sized and mini contracts overnight and often are active during the hours that precede the pit open at 8:30 a.m. CDT, traders said.
Customers first started reporting problems connecting to the exchange's system at about 4:15 a.m. CDT, and the system was shut down about an hour later after the CME found it affected a significant number of users, spokeswoman Ellen Resnick said.
An internal hardware component on the main electronic trading system was not working properly, and the exchange switched to its backup system, Resnick said. The component will be replaced after Friday's session, she said.
Outages of an electronic platform can be a nuisance for firms whose customers depend on screen-based trading, as the firm then needs to enter the large number of orders that built up while the system was down. But Globex has a pre-open session before opening again, giving firms an opportunity to catch up.
"If Globex goes down for every firm, it's not as big of an issue because everyone is prohibited from trading," said Carrie Schlichter, operations manager at Lind-Waldock, a division of Refco LLC. "(When) certain firms can't connect to Globex, that's when it causes more of a customer response (problem)."
Schlichter, who is Lind-Waldock's Globex administrator, said the firm has experienced problems connecting to Globex in the past, rendering it impossible for the firm's retail customers to put in their own orders. In that situation, the firm has to enter customer orders manually, taking longer than the seconds it normally takes customers to execute on their own.
The CME said in mid-July that some users were having trouble connecting to Globex during periods of high volume. Those problems prompted the exchange to delay the planned expansion of electronic trade of futures on Eurodollars, the world's most actively traded futures contract, until October.
Friday's outage likely had little impact on Eurodollars, which are predominantly traded in the open outcry pits.
In addition to other problems, the system in at least one instance sent a user an erroneous message that an order was canceled, when in fact it was filled.
In June, the CME filed for an initial public offering, the first major U.S. financial exchange to seek approval to go public. At the time, the CME said it will use the proceeds, in part, for possible acquisitions and technology upgrades. (Additional reporting by David Bailey) |
