NEW YORK Dec 23 The CME Group said on
Monday it would adjust the clearing levels of some bond futures
trades after the prices of those contracts spiked unusually in
After several hours of subdued movement following the start
of trading at 6:00 p.m. EST (2300 GMT) on Sunday, a burst of
activity in the March 2014 U.S. 30-year Treasury future
just after 2:30 a.m. EST Monday sent the price dramatically
The futures move caused a corresponding plunge in
thirty-year bond yields, which fell as much as 40
basis points to around 3.50 percent, according to some price
indications. The yields quickly recovered and were last trading
at 3.83 percent.
"It looked like your typical 'fat-finger' trade. It seemed
to be caught relatively quickly," said Charles Retzky, director
of futures sales at Mizuho Securities USA in Chicago.
It wasn't known if there were any buyers of 30-year bonds at
the yield lows. If there were, those buyers could be facing
losses because cash trades cannot be canceled.
The timing of the event, very early in the day during a slow
Christmas holiday week, was expected to limit any spillover.
"It's a relatively small amount," Retzky said. "I don't
think it's going to affect trading the rest of the day."
Had the incident occurred during normal U.S. trading hours
in a regular week, it would have been noted by a greater number
of market participants beyond Treasury futures and could have
triggered a wider market event.
U.S. equity index futures were open at the time, but the
most liquid contract, the March 2014 S&P 500 e-mini,
showed no evidence of a spillover from the long bond future
CME spokeswoman Alex Gorbokon said that the firm's internal
market regulation team and regulator, the Commodity Futures
Trading Commission, were informed of the incident.
During the event early on Monday, the futures contract was
trading around 130-6/32 and started ticking higher shortly after
the trades started crossing. By 2:37 a.m., the contract had
climbed 9/32 in price to 130-15/32, and by the end of that
minute, it began surging rapidly in price.
Within the space of 13 seconds, starting at 2:37:51 a.m.,
the contract shot up nearly 5 full points in price to reach a
high of 135-23/32 by 2:38:04 a.m. It retraced most of that gain
over the next 56 seconds, falling 4-13/32 in that time, back to
131-10/32. By 2:58 a.m., the price had fallen back to 130-10/32.
The CME said on Monday it would adjust the clearing levels
for trades over 131-12/32 to that level.