So after five months of exuberant overpaid “professionals” looking in to the reasons why the market dropped 1000 points and recovered most in the same day in May of this year, an educated conclusion has surfaced and the scapegoat is exposed!
According to Keith Saxton, Global Director of Financial Markets at tech giant IBM
“What we’ve learned is that the regulators don’t have the same tools as the people playing the market. We have to tool up the regulators and supervisors to see what’s actually going on in near real time.”
An electronic program that was triggered placed an order and caused “all he!! to break loose” by scaring the market in to paralysis as they watched the ticker descend faster than they have seen at any point in the markets history.
Because this happened in relation to a derivitive contract, 35,000 of the e-mini S&P contracts plus another 40,000 various futures contracts to be exact, The CFTC who is in charge of all futures contracts, has to cooridinate with the SEC to make sure everything is in place to control derivitive trading. Dont’ forget where the CFTC’s magnifying glass is right now and who they are dismantling. The proprietary traders of all the “big boys” that have their very large hand in a cookie jar with a small opening. These prop traders also have a very large interest in precious metals futures contracts. Once again the Volker factor returns.
But not to fear, the first step has been taken to protect investors by the SEC who has put circuit breakers on specific S&P stocks!
Doesn’t that make you feel much better? Just pull the plug, stop the losses and all will be ok.
Is the gold market prime for a similar descent? If a major holder of gold decides to sell at say, $1,320 and the market pulls back just enough to trigger a stop loss and automatic sell order by the next biggest holder of gold, a domino effect is likely to take place.
Isn’t it funny, how one trade supposedly caused this event, but it has never been documented that one trade has ever had this type of effect in the markets entire history… odd.
You can find the official CFTC press realease here, sends you on a lil bit of a goose chase though;
And the WSJ article here;