(Recasts; adds trader comment)
By Frank Tang
NEW YORK, April 29 U.S. futures exchange CME
Group Inc is considering the introduction of daily
limits on price moves in gold and silver futures in a bid to
rein in wild volatility that has spooked investors in recent
years, a CME official said on Tuesday.
CME at present has price fluctuation limits for futures
contracts in some energy, agricultural commodities and financial
products, but none for its precious and base metals products.
The possible move reflects growing concern at the largest
U.S. exchange of futures and options about big bouts of buying
or selling that have caused huge fluctuations in prices without
any apparent fundamental reason.
"We don't have price limits in gold and silver. That's
something that we are looking into," Miguel Vias, CME Group's
director of metal products, said in a panel discussion at an
industry event, in response to a question about how the exchange
protects investors from excessive volatility.
U.S. exchange operators are already edgy about allegations
over high-speed traders rigging the Wall Street stock markets
and the so-called dark pools, or trading outside of exchanges,
in the wake of the recently published book "Flash Boys: A Wall
Street Revolt," by Michael Lewis.
The biggest concern for the exchange is the array of
sophisticated trading programs that are capable of significantly
pushing the market higher or lower, Vias said.
Unusually big moves and the fears of price "slippage" - the
difference between the price at which a market player wants to
execute an order and the price at which they are able to do so -
have turned some gold and silver futures investors away, he
In the first four months of the year, COMEX gold futures
volume dropped 10 percent from a year ago, while turnover of
silver contracts gained about 7.5 percent.
The gold and silver futures are the most-traded commodity
contracts after crude oil and other energy products.
Dealers say the frequency of wild price movements has
increased, roiling trading. The exchange introduced circuit
breakers, such as "stop logic," which prevents cascading stop
orders that could exaggerate price movements in illiquid
But support for setting limits on price moves does not
appear to be universal.
"I think the breaks in trading are good, but I wouldn't
support fixing price moves," said one U.S. trader.
The price of gold suffered a record two-day drop of
$225 an ounce on April 12 and April 15 of last year amid fears
of the U.S. Federal Reserve starting to unwind its market
stimulus and news that Cyprus could sell some of its gold
In October, many traders and investors were rattled by a
series of abrupt, and largely unexplained, trade surges that
whipsawed prices and disrupted trade in CME Group's COMEX gold
Unlike the meteoric declines in April and June, when
institutional investors exited en masse in a two-day selloff,
these seemingly sporadic trades lasted only minutes but
overwhelmed volumes and price direction on each occasion.
(Additional reporting by Josephine Mason; editing by G Crosse)