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CME OIL TRADING HALTED DUE TO TECHNICAL GLITCH
By DAN STRUMPF and JERRY A. DICOLO
A technical glitch shut down CME Group Inc.'s electronic oil-trading platform for more than an hour Monday, throwing the market into disarray and sending traders to place bets on the New York Mercantile Exchange floor.
The shutdown shortly after 2 p.m. EST halted electronic trading of the world's biggest oil contract and roiled what had been a relatively low-volume session. Prices rose 50 cents a barrel from levels earlier.
The shutdown was caused by "technical issues," according to the CME. The Globex trading platform resumed at 3:15 p.m. EST. "The issue has been fixed and the market is back up and running," a CME spokesman said. He declined to comment further about the cause of the glitch. In a notice on the CME Group's website, the firm, which owns the Nymex, said it would cancel outstanding orders placed Monday on the electronic trading platform, but not completed trades.
The shutdown, which coincided with the end of the trading session, led to confusion over the final day's price of oil, called the settlement price. Front-month March crude settled up $2.24, or 2.3%, at $100.91 a barrel.
Such technical glitches are relatively uncommon for the CME, where an average of 11.6 million contracts changed hands each day last month. There are only two major venues, the CME and rival IntercontinentalExchange Inc. for trading crude-oil contracts.
Heard on the Street
Even though electronic trading ground to a halt, open outcry trading remained open. Traders on the floor of the Nymex rushed into the normally sleepy oil-futures pits, looking to place trades and take advantage of any price differences due to the glitch, traders said.
With electronic trading halted, fewer people had direct access to the market. For a floor trader, that creates an opportunity to profit on a wider gap between prices offered by buyers and sellers.
"A bunch of options guys ran over there…everybody is trying to take advantage of the wide quotes," said Fred Rigolini, vice president of Paramount Options, a brokerage on the Nymex floor.
"There's a little yelling and screaming in the crude ring right now," said Jeffrey Grossman, president of BRG Brokerage on the Nymex floor, shortly after the Globex halt.
The CME didn't offer additional details as to the cause of the shutdown. However, an analysis of the trading halt by Nanex, a market data service, found that shortly after 2 p.m., a series of 800 to 1,000 price quotes in Nymex crude-oil futures repeated in a loop a dozen times over for about four minutes. Globex shut down shortly thereafter.
"The same block of quotes just kept getting transferred by the system," said Eric Hunsader, CEO of Nanex. "Then I think someone pulled the plug."
John Woods, a Nymex floor trader and head of JJ Woods Associates, said telephone calls from customers were twice as high as during a normal trading session, and he headed to the crude-oil pit.
In recent years, the majority of oil-futures volume has flooded to the electronic market, leaving trading thin on the Nymex floor in downtown New York. When the exchange announced the day's settlement would be computed from the floor, Mr. Woods said there were cheers and laughter.
"It was a throwback to the old days; I guess this just shows we aren't done yet," he said.
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