UPDATE 1-Volatile trade in futures ahead of U.S. jobs data causes halts

Fri Jun 7, 2013 3:20pm EDT

By Angela Moon and Frank Tang

NEW YORK, June 7 (Reuters) - Unusual, volatile trading in markets just ahead and after U.S. jobs data was released on Friday caused brief halts in stock and bond futures.

It was not clear what sparked the volatility but this type of movement has happened in the past when traders tried to speculate on the outcome of data ahead of its release.

The popular 10-year Treasury note futures contract traded on the CME Group's Chicago Board of Trade saw its trading halted about one second before the release of the May payrolls data. The S&P 500 e-Mini futures, the most actively traded futures contract, was halted on CME just a second after the jobs report was out as activity spiked.

Separately, gold futures saw a sharp increase in volume just before the jobs report was released. Gold futures dropped sharply, from showed a move from $1,409 per troy ounce to as low as $1,398.20, according to Thomson Reuters data. Nearly 5,000 contracts were traded in a one minute period at 8:30 a.m. EDT (1230 GMT), the busiest minute of trading on Friday.

Some market participants blame the volatility on high-frequency trading, which has gained widespread prevalence in recent years.

"One of the major problems is that for many of these blackbox and high-frequency traders, they are still operating through" major economic indicators, said Phillip Streible, senior commodities trader at Chicago-based futures brokerage R.J. O'Brien.

"It triggers a series of buys and sells very quickly, and that's how market movements are all over the place."

The S&P e-mini futures spiked as high as 1,632.75 to a low of 1,619.25. After the sudden moves, e-Mini futures were halted at 8:30:01 a.m. to 8:30:06 a.m. T-bond futures were also halted at 8:29:59 to 8:30:04 a.m.

Michael Shore, a CME Group spokesman, said there was a "stop logic event" just after 8:30 a.m. EDT.

Stop Logic, CME's mechanism to introduce a momentary pause in trading, is aimed at preventing large price movements from cascading stop-price orders, an order to sell or buy a security when it reaches a particular price.

It also allows participants to provide additional liquidity and the market to regain equilibrium.

The CME spokesman declined to elaborate when asked what parameters triggered the stop logic event earlier.

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