Merc voids 200 e-mini trades
(Reuters) — The Chicago Mercantile Exchange said it canceled some 200 transactions in its actively traded mini Standard & Poor's 500 equity futures contract on Monday after a sudden drop in the futures price affected late-session stock market trading on Wall Street.
An exchange spokeswoman said that shortly after 2:08 p.m. CDT, the S&P September e-mini contract fell from the 1,000 level to 990.50 in just 4 seconds.
There were rumors in late afternoon trading on the Wall Street stock market in New York that the decline was prompted by a trading error.
"If somebody hits the wrong button, it can generate a substantial order, and that can move the market," said John O'Donoghue, CSFB managing director of listed trading.
But the exchange said it was not an error trade.
"It was a drop in the market triggered by a cascading series of stop-orders during a period of relatively thin market activity," said exchange spokeswoman Anita Liskey.
Stop orders are those placed at specific prices, and are sometimes triggered as a market moves forcefully in one direction. Liskey said the exchange has specific policies to deal with such situations. In this case, the exchange canceled all trades below 996, or about 200 trades, representing less than 0.01 percent of daily trading volume. The market quickly returned to normal.
The September futures contract was trading at 1003.50 by 4 p.m. central time. The underlying S&P stock index closed 1,003.86, up 5.72 percent from Friday.
The S&P e-mini is the most actively traded equity futures contract on the Merc and has seen explosive growth in recent years.
The Merc is the largest U.S. futures exchange and listed its stock on the New York Stock Exchange last year. Merc shares closed Monday at $77.35, up 2.17 percent.
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