CME index futures hit by Globex technical snag
Thu May 1, 2003 07:22 PM ET
(Updates, recasts throughout)
By Ros Krasny
CHICAGO, May 1 (Reuters) - The nation's largest futures exchange, the Chicago Mercantile Exchange CME.N , suffered an hours-long outage on Thursday on Globex, its electronic trading platform, shutting trading in some contracts.
The outage highlighted a big worry about moving to electronic trading from traditional open-outcry trading: system stability, or what happens when the networks fail.
A CME official said the outage was caused by problems with global network switches that route data from trading firms to Globex platform.
The outage halted trading in the popular E-Mini S&P 500 and E-Mini Nasdaq-100 futures, respectively No. 2 and No. 6 in traded futures volume in the United States last year.
The E-Mini contracts are traded only on Globex. The contracts are popular speculative and hedging vehicles for financial institutions and individual traders alike, and their shutdown had ripples across the U.S. stock market.
Problems were contained in part because dealers shifted orders to the CME's trading floor, where similar futures products are traded the old-fashioned way.
Most of the Globex platform was brought back online at 3:45 p.m. CDT (2045 GMT), but the E-Mini S&P 500 was still off-line at that point, the exchange official said.
The CME, the world's No. 2 futures exchange, last endured a major Globex outage on Sept. 20. But in that case, a two-hour early-morning shutdown was not seen as damaging as Thursday's lengthy outage through the heart of the trading day.
FLOOR TRADING RETRO, BUT STILL A SAFETY VALVE
The Globex outage provided a boom for the CME's traditional S&P 500 futures contract, which is traded via open outcry for most of the business day before moving to Globex for after-hours trading.
"More E-mini traders came into the S&P pit, and you could obviously tell that the volume shifted to the big S&P futures," one CME trader said.
"It's important that we do have a physical backup to trading," he said. "Our markets don't shut down. Traders can go to the pit."
Trading in foreign currency futures, enjoying a resurgence of activity as more and more trading migrates to Globex from the trading floor, was also mildly disrupted.
But Eurodollars, the biggest U.S. futures contract, were barely affected because they are still mostly traded by open outcry.
Dealers said many stock index trading desks were thrown into disarray by the Globex outage, which started around 10:30 a.m. CDT (1530 GMT).
"We were notified by the Globex control center that any order that was working before the trading halt, with some currency exceptions, would be expired." said Kerry Schlichter, operations manager with Lind-Waldock & Co., a division of Refco LLC.
"Anything that was a working order before the halt was canceled. We had a tremendous amount of orders working that needed to be placed again," she said.
The CME, which went public in December, has been leaning heavily on electronic trading, and the growth of the E-mini sector, to boost revenues.
In the first quarter of 2003, some 48 percent of its transaction fees were generated by electronic trading, up from 33 percent a year earlier.
At a forum this week on the future of trading in Chicago, Scott Johnston, the CME's chief information officer, told Reuters that achieving stability on the electronic trading platform was a major priority.
(Additional reporting by Doris Frankel) |
