Regulators examining the causes of the brief stock market free fall last Thursday are looking closely at heavy selling in the market for stock-index futures by a single trader, beginning 10 minutes before stock prices began to plummet.
Gary Gensler, the chairman of the Commodity Futures Trading Commission, said at a Congressional hearing on Tuesday that during that crucial time period, the futures trader, whom he would not identify, accounted for about 9 percent of trading volume in the most actively traded stock-index derivative contract, known as the 500 e-mini futures contract.
All of the trader’s orders were to sell, Mr. Gensler said, while most of the other 250 traders who were active in the same market that day were both buying and selling securities.
As the trader’s orders went through, the futures index on the Chicago Mercantile Exchange began to plummet.
The identity of the trader remained unclear. Terrence A. Duffy, executive chairman of the CME Group, which operates the Chicago exchange, said on Tuesday: “We obviously won’t divulge that market information. We are in contact with the folks that did the trade. There is no question that it is a bona fide hedger” and not someone intending to disrupt the markets.
Moments after the trade, individual shares traded on markets around the country started to drop sharply, and regulators are looking at whether the trade in the futures market could have been a catalyst for the spiral.
Mr. Gensler emphasized that regulators were continuing to search for the causes of the brief panic and were likely to find other trades that could also have contributed to the plunge. Read more »
BUSINESS STRATEGY – OTTAWA — During much of the eight-month crisis between Toyota and safety regulators over recalled vehicles in the United States and Canada, the public pronouncements from the two governments have been remarkably different.
As early as November, the National Highway Traffic Safety Administration criticized the Japanese automaker for providing “inaccurate and misleading information,” while its Canadian counterpart, Transport Canada, issued a statement that declared, “Transport Canada applauds Toyota’s action to protect consumers.”
The divergent messages have helped create the impression in Washington and elsewhere that Toyota has been more cooperative with Canadian regulators, and that somehow Canadian car owners have received better and swifter treatment. But newly released Transport Canada documents show that behind the scenes, some Canadian regulators were just as frustrated — and sometimes alarmed — by Toyota as were transportation officials in the United States.
“Toyota Canada’s action seriously undermines this safety issue,” one field investigator for Transport Canada wrote in an e-mail message in October after reviewing Toyota’s public disclosure over floor mats that may have caused unintended acceleration. “Frankly, I’m appalled by their action.”
As lawmakers in Washington hold a hearing on Thursday to consider new American safety regulations as a result of the recall of millions of Toyota vehicles, a parliamentary committee here is reviewing thousands of pages of e-mail messages and other internal regulatory documents that are casting the carmaker in an unflattering light — and are causing some Canadians to question the effectiveness of the country’s approach to regulating an industry that politicians have carefully courted rather than alienate. Read more »
All of the trader’s orders were to sell, Mr. Gensler said, while most of the other 250 traders who were active in the same market that day were both buying and selling securities.