Monday, May 17, 2010
Fat finger 'identified'
Here is the city: Dow Crash 'Mystery Trader' Said Identified
Regulators are 'looking closely at heavy selling in the market for stock-index futures by a single trader, who accounted for around 9% of the trading volume on the 500 e-mini futures contract' in the period under review.
Posted by refusetobuy @ 10:04 AM (471 views) Add Comment
2 Comments
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1. flashman said...
We execute hedging strategies for our clients and I think that it is unlikely that the profile of this selling could fit into any hedging strategy. I’m not saying that the story isn’t at least partially true but I think that a large portion of the 75,000 contracts was probably sold with some motive other than hedging. The trader would have been very well aware that a rapid disposal of 75,000 contracts would play havoc with the algorithms of trading computers and it is not hard to work out the direction of their reaction. However, my guess is that the reaction was much stronger than anticipated.
I imagine he bought something else that day, shortly after the reaction (hence the claim that it was part of a hedging strategy) but it is not exactly orthodox to deliberately move the market as part of a hedging strategy. Hedging strategies are supposed to protect against movements, not cause them.
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