CME Halts Energy Trading After Gasoline Plunge

[IDemo]

Source: http://online.wsj.com/article/BT-CO-20110511-715773.html

NEW YORK (Dow Jones)--A plunge in gasoline futures triggered a trading halt in crude oil, heating oil and gasoline for the first time in over two years Wednesday, roiling broader markets already on edge after recent commodity sell-offs.

At 12:06 p.m. EDT Wednesday, gasoline futures declined by the 25 cent daily limit set by the exchange. That followed a U.S. Energy Department report suggesting that fuel consumption is declining. The tumble triggered circuit breakers on Globex, CME Group Inc.'s (CME) electronic-trading platform, resulting in a five-minute freeze for three of the exchange's most heavily traded commodity contracts.

Trading resumed on both the floor of the New York Mercantile Exchange and electronically at 12:11 p.m. EDT. Oil, gasoline and heating oil kept falling following the resumption of trading, though traders said the mood was relatively subdued on the Nymex floor after the exchange's intervention.

"We got close (to trading limits) a few days ago, and so people double-checked the rules. So guys were prepared," said Peter Donovan, a trader with Vantage Trading in the Nymex options pit. "We all took it in stride ... I'm not sure five minutes in a move of that magnitude is going to make much of a difference."

Read more: http://online.wsj.com/article/BT-CO-20110511-715773.html

[ixion]

1. It must be a nice feeling to be able to 'stop' the game to your benefit...

really... profit up one side and down the other. :puke:

[freshwest]

11. Hey, those guys are bookies!

[girl gone mad]

19. All of these markets are so incredibly rigged now.

Maybe they should just go ahead and outlaw sell orders.

[Brickbat]

2. There goes that free market again...

[valerief]

14. Yeah, free money for the wealthy. nt

[Lucky Luciano]

35. Don't worry - it would have been halted if it was up 25 cents too. nt

[villager]

3. Wait! Oil's going too low and threatening bloated profits! Stop trading! Stop trading!

I don't suppose they have a mechanism for stopping when the price gets "too high," eh?

[freshwest]

12. Right on all points!

[Lucky Luciano]

36. They do indeed. If it were up 25 cents intea day it would have triggered the limit-up halt. nt

[freshwest]

4. And they wonder why we think the prices are rigged?

[iamthebandfanman]

5. yay and my local gas went up ten cents this morning! :) n/t

[HankyDubs]

6. i guess this is why

the talking heads are all talking about how flooding along the mississippi will drive up gas prices.

[Sonoman]

7. CME DOUBLED the daily limit.

That's what let/made this happen.

Then CME slammed the door on the shit-storm that they, themselves, created.

Free Market, my ass. More like One-Way Street.

Sonoman

[Pab Sungenis]

8. And we'll see these 25-cent-in-one-day plunges at the pumps

sometime about August 17, 20keepdreaming.

[Dreamer Tatum]

The relationship between spot and futures prices is NOT clear

and is the subject of countless research papers.

I just love how people here, however, have causality perfectly clocked.

[Pab Sungenis]

17. I'd settle for a five cent drop.

But gas is still going up around here.

[Psephos]

31. It's going up because floodwaters are threatening refineries near the Mississippi.

There aren't enough refineries to provide a capacity cushion. Utilization is well above 90%. That means gasoline gets priced at the margin, and any threat to full-bore production causes a disproportionate jump. This effect is independent of (or should I say, in addition to) the underlying price of oil.

Springtime is also when refineries go off-line to change from winter to summer blends, and also to make the seasonal specialty blends required by the EPA. Downtime threats from externalities (floods, e.g.) are amplified during the change-over period.

We should have spare refinery capacity, but we don't. That would move price sensitivity away from the margin, and even out spikes from accidents and natural events. But it's very hard to build them these days, for political reasons.

[alarimer]

33. Just more bullshit excuses to keep screwing us.

I don't buy the lies anymore.

[Yo_Mama]

39. Utilization is running in the lower 80s

Most recently, 81.7:
http://ir.eia.gov/wpsr/wpsrsummary.pdf

[Psephos]

41. self-delete n/t

[Thor_MN]

42. And summertime is high driving season, Fall is changover to winter blends, winter is heating...

up up and away...

[LibertyLover]

47. Here in DC on the local all-news radio station WTOP

they had a talking head on yesterday who predicted a 50 cent drop by Memorial Day. Today, they had a story that gas was going to fall in price immediately, and I mean immediately, followed by another talking head discussing the Mississippi River flood might impact refineries and therefore prices would go up before he reversed himself and said that the refineries had just said everything was ok and that yes, there would a price drop by Memorial Day. Yeah, I'll believe it when I see it. In the meantime I'm paying well over $4 for a gallon. Thankfully I have a reasonably fuel efficient car.

[L. Coyote]

9. If the oil futures gamblers lose their whole grubstake, the consumer pays that much less!

Woooo Hooooo if the gamblers get burned by their own fire. The rest of us are already crisp.

[FarLeftFist]

10. Imagine playing as many hands as you want in Vegas...

But no matter how bad you do the MOST you are allowed to lose is +$100 profit, but the most you are allowed to win is UNLIMITED.

[freshwest]

13. Too bad there's no 'windfall profit tax' allowed in Koch, USA, Inc.

[Pab Sungenis]

44. I wonder about the WPT.

Could such a tax be instituted on the STATE levels?

[dkf]

15. This is meant to prevent things like the flash crash.

[girl gone mad]

20. Which is completely absurd.

The momo program trading entitles i-banks to mad profits on the way up, they should accept the losses that those same algos cause when computerized sentiment flips.

[westerebus]

22. X666

:evilgrin:

[villager]

27. My mere "+1" doesn't seem devilish enough!

;-)

[westerebus]

30. GGM knows her stuff.

:hi:

[Lucky Luciano]

37. Come on GGM! You know full well those traders are still stuck

With those positions once they go limit-down. When it reopens, they still have the risk....and you know full well that there us a halt with an upmove of the dame magnitude.

[westerebus]

43. Any insight as to the CME intervention in the silver market?

I didn't see any stops on the way down trigger a halt to trading. Maybe I missed it?

[Lucky Luciano]

45. Silver does not have limit up/down.

This coorectipn in silver is due to the CME increasing margin requirements due to it's bubbly price and volatility. This caused deleveraging in the silver market, which has a snowball effect.

Today, gasoline in the futures market will be limit down at $2.8728 and limit up at $3.3728.

[westerebus]

46. It is a small market in comparison to oil.

Yet, stops protect markets. Trade the risk and take your chances in a market with a floor and a ceiling.

How bad can it hurt? You come back to the point it stopped out. Not so in silver.

Problem with that is the TPTB have vested interests and voting rights on the CME.

That makes it less risky for some people IMHO.

And when physical disconnects from the paper?

Would you want to trade the oil market like that?

Off to work, see you later. Thanks for the reply.

[whosinpower]

16. Hmph

Just looked outside across from where I work....gasoline went UP another 5 cents a litre!

Ah well....you see....long weekend is coming and gas ALWAYS goes up before....grrrrrrr

[Citizen Worker]

18. Isn't the "free market" something to behold?

[freshwest]

21. You saw it? Where is it? Give us GPS coordinates and we'll put it in a zoo.

[jerseyjack]

23. Limit up or down was instituted to prevent severe market swings

This was first done after the stock market decline in 1987. It provides stability in the market as opposed to major loss or gain founded by rumor. It was not instituted to protect the market guys when they are losing.

-- I have no skin in the game in terms of owing futures or options.

[Name removed]

24. Deleted message

Message removed by moderator. Click here to review the message board rules.

[jzodda]

25. What a joke

When the price is going up do they put limits on trading? So when it drops and the gas monopolies are making less profits and the speculators who drove up the price to begin with are being hurt then they stop trading? What a joke....

And even though I have read about these so called limits when the price is rising...I haven't read about trading being stopped in that direction. If I am wrong somebody correct me....

[Lucky Luciano]

38. That just tells you how big a move 25 cents is.

Limit-up may not have ever occurred for gasoline. Massive plunges happen more than massive intraday up moves. I do recall Sep 19, 2008 as the day the SEC disallowed the shortselling of financials and there was panic SP500 futures buying pre market. During premarket hours, the limit move was 60 points and it was up 60 points. There was so much pent up demand, that when the CME took the limit off when the market opened, the futures spiked 23 points instantly, but the cash market never got that high and futures fell back inline with the cash market within 30 seconds. Tough one to arb unless you had the foresight to put sell limit orders 12 or 15 point above the limit up price for the open.

[KansDem]

26. There's that "invisible hand" again!

Wait!...that's Johnny Cash and his hand isn't invisible. But you get the message.

[tomm2thumbs]

28. "Heads we win, Tails we win... "

ain't it awful how hard life is for the oil cump'nees?

[OwnedByFerrets]

29. They sure as hell didnt stop it on the way up, did they?

Fucking bookies, betting with American's money and future.

[Trajan]

32. How bout Circuit Breakers on the price of gasoline on the way up ?

[IDemo]

34. Marxist motorist, eh? n/t

[Lucky Luciano]

40. If gasoline is up 25 cents intraday, there us also a circuit breaker. nt

[fascisthunter]

48. controlled market... there is no free-market especially in this country