Eurex rebutts rogue trade complaints

Eurex rebutts rogue trade complaints

The Eurex derivatives market has refuted allegations that its software was to blame for a rogue trade which led to the cancellation of dealings on the exchange last week.

Eurex has been forced to defend its actions in the face of complaints from market participants who had laid off trades in underlying shares after the DAX index slumped by 800 points following entry of a mistaken derivatives order early on Tuedsay morning. Some 5000 futures contracts, with a value of £400 million, were recalled as a result of the misplaced order.

Late Friday, Eurex reconfirmed that erroneous participant order entry led to the extreme price changes experienced by market participants. "Eurex dismisses speculation that software supplied by Eurex or trading simulation could have been the cause," the exchange stated.

The exchange says that requests for volatility interruptions have been discussed with the market and within Eurex participant working committees. The exchange says that market participants have repeatedly stated a preference for continuous trading which permits users to hedge risk at any time, particularly during volatile market situations.

In its statement, Eurex "rejects any criticism that it has not introduced volatility interruptions which had been supposedly broadly requested".

The exchange says it will continue its dialogue with market participants on this, in order to determine whether the market has changed its preference. It will also discuss in more detail proposals to introduce product-specific maximum order sizes to prevent future mis-trades. Eurex points out that it already offers functionality which allows market participants, within their own responsibility, to limit individual order sizes for each product for each individual trader.

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