CME Refutes SEC's Entire 104 Page W&R Scapegoating Drivel In Two Simple Paragraphs

Tyler Durden's picture

We couldn't have said it better ourselves. From the CME:

Futures and options markets are hedging and risk transfer markets.
 The report references a series of bona fide hedging transactions,
totaling 75,000 contracts, entered into by an institutional asset
manager to hedge a portion of the risk in its $75 billion investment
portfolio in response to global economic events and the fundamentally
deteriorating market conditions that day. The 75,000 contracts
represented 1.3% of the total E-Mini volume of 5.7 million contracts on
May 6 and less than 9% of the volume during the time period in which the
orders were executed
.  The prevailing market sentiment was evident well
before these orders were placed, and the orders, as well as the manner
in which they were entered, were both legitimate and consistent with
market practices.  
These hedging orders were entered in relatively small
quantities and in a manner designed to dynamically adapt to market
liquidity by participating in a target percentage of 9% of the volume
executed in the market.  As a result of the significant volumes traded
in the market, the hedge was completed in approximately twenty minutes
with more than half of the participant's volume executed as the market
rallied – not as the market declined
.  Additionally, the aggregate size
of this participant's orders was not known to other market participants.

Additionally, the most precipitous period of market decline in the
E-Mini S&P 500 futures on May 6 occurred during the 3½ minute period
immediately preceding the market bottom that was established at
13:45:28. During that period, the participant hedging its portfolio
represented less than 5% of the total volume of sales in the market.

Now the only question is, when does Waddell and Reed sue Mary Schapiro for slander and defamation, or, if they decide to keep quiet about all these baseless allegations, pehaps some aspiring investigative reporters can uncover how much in taxpayer-funded "damages" the SEC may have awarded the Kansas firm in advance of the report publication.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
VK's picture

Long live the farce! 

Ps - Stop trading these markets, get out!!

-1Delta's picture

IS CFTC  COT data working today?

orangedrinkandchips's picture

panic managers...why in the hell is that fuck doing it? at the bottom....wait til it gets horrible and THEN hedge yourself you W&R shmuck.

kato's picture

it was not a panic manager you dumb fuck they executed an order. it happened to have been bigger than the one lots you diddle with.

ZeroPower's picture

Lol, said strongly, but correct.

SheepDog-One's picture

SEC... what a bunch of lying imbeciles!

Commander Cody's picture

The SEC provides comedic relief while the Fed transfers all wealth to the corporate oligarchs with Congress' blessing.  Serfs up!

euclidean's picture

This response from CME is not unexpected since they are the providers of E-minis via Globex. But also what is not known by many including myself are the members of the Joint committee -

SEC Chairman Mary Schapiro and CFTC Chairman Gary Gensler are the co-chairs of the Joint Committee. Other members of the Joint Committee named last week:

·         Brooksley Born — Former Chair of the CFTC

·         Jack Brennan — Former Chief Executive Officer and Chairman, Vanguard

·         Robert Engle — Michael Armellino Professor of Finance at the NYU Stern School of Business

·         Richard Ketchum — Chairman and Chief Executive Officer, FINRA

·         Maureen O'Hara — Professor of Management, Professor of Finance, Cornell University

·         Susan Phillips — Dean and Professor of Finance, The George Washington University School of Business

·         David Ruder — William W. Gurley Memorial Professor of Law Emeritus, Northwestern University School of Law; Former Chair of the SEC

·         Professor Joseph Stiglitz, Nobel Laureate and Columbia Business School


I figured Brooksley Born as no idiot, and yet has allowed this report to be issued under the following preamble - "The Commissions have expressed no view regarding the analysis, findings or conclusions contained herein.". So the purpose of this report is what??

--------- and the report has failed to address this statement - "Over 20,000 trades across more than 300 securities were executed at prices more than 60% away from their values just moments before. Moreover, many of these trades were executed at prices of a penny or less, or as high as $100,000, before prices of those securities returned to their “pre-crash” levels."

... even after having received statements from DEShaw and Co that say -

Statement of Dr. Anoop Prasad, of DE Shaw & Co

(emphasis mine)

"First, we want to emphasize that financial market trading does not take place in a vacuum. The day of May 6th began dramatically, with enormous volatility experienced in interest rate and currency markets as the world watched Europe’s credit troubles unfold, dramatized by the riots in the streets of Athens on every trading floor’s TV screens, well before and seemingly far removed from later dislocations in the U.S. equity markets. These events called into question the global economic recovery and exacerbated the skittishness of markets against the backdrop of heated Congressional debates on a new regulatory landscape."

"Through the afternoon trading volumes grew and price and execution data feeds from some venues began to get delayed. At the same time trading was slowed at the NYSE. As a result, liquidity supply at that venue became largely unavailable, while liquidity demanders simply flooded alternate venues, leading to a temporary but systematic supply/demand imbalance. The combination of delayed and unreliable quote and execution data combined with inconsistent policies at different trading venues and an ecosystem that includes market orders, stop loss orders and other order types resulted in rather perverse dynamics in the limit order books of a number of stocks and ETFs, including quotes and executions at unrealistic prices. Another factor, or perhaps an alternative interpretation, was that bad data as well as other events drove the typically matched timescales for liquidity provision and liquidity demands out of alignment."


It is obvious even to a layman that such a concise singular yet innocuous action such as the selling E-mini's brings about such widespread and disproportionate chaos. No provision of formal conclusion by this report is an indictment on the ineptitude and lack of understanding of other very plausible and more maligned market operations.


Ragnarok's picture

Concierge:  Hello, you've got Chez Satan, how may I help you?

SEC Assistant: Yes, Id' like to confirm that a "special place" has been reserved for Miss Schapiro.

New_Meat's picture

she's been doin' this a while, does she it...?

- Ned

New_Meat's picture

idiot captcha mask thingie, but it finally works, guess I'm just a little porcine and nay machine nor too stupid to count on my ... hey, ... I ain't got no fingers to count on ;-(

molecool's picture

Those SEC clowns who produced that report may be better off going back to browsing p0rn.

freshman's picture

They never stopped that. That explained why the report is what it is.

EscapeKey's picture

Instead of releasing this report, they should just have compiled a list of their favorite porn sites. If they had, I might actually have read it, unlike this giant piece of poo.

MsCreant's picture

I don't know if you should mix porn and "rimshots" in the same thread. The dialog could get really pun-ishing around here. Just sayin'.

hedgeless_horseman's picture

We do like to get our licks in.

Rasna's picture

Excellent... That was great!

tip e. canoe's picture

and considering it was tranny porn, i'm sure they enjoy being the butt of our jokes.

MsCreant's picture

The rimshot made me wonder if the Trannies wore pearl necklaces? 

tip e. canoe's picture

maybe they gave them instead?

New_Meat's picture

I'm peeing my pen here.

MsCreant's picture

Did you record and post it to a porn site? SEC is into that too.

Rick64's picture

 Lets see if this gets as much publicity as the SEC garbage report.

midtowng's picture

I don't understand. How can the SEC possibly be wrong?

SheepDog-One's picture

I agree with the conclusion, no doubt W&R was offered a few billion $ and a month free no peeking trading freedom to do as they please.

Rainman's picture

....or more likely a refund of W&R's last trading fine of $77 million. A past sin gets forgiven and all is cool.  

cossack55's picture

Flash Crash = stuxcrash  or maybe stuxflash.  Who is behind it?

Which ethnic/religious/national/creed/race can we blame it on in order to open the 2nd Front.  The whole southwest Asia scene is so old hat. 

Mad Max's picture

I vote Borneo.

For too long have we tolerated Borneo's devious and destructive ways, their attempts to control the world, and their cunning deceit.  Borneo is clearly the most dangerous threat in the world today, a threat to the very existence of "Truth," "Justice," and the American Way of Life.  Nuke Borneo.

Greater Fool's picture

I still want to know what Waddell and Reed did to piss off the SEC and CFTC so much.

Rusty Shorts's picture

HA, yahoo report on W&R...


One large trader led to May 6 stock market plunge

MsCreant's picture

One large traitor led to May 6 stock market plunge

Rusty, let me copy edit your stuff if you are going to make errors like that, K?

Rusty Shorts's picture

MsCreant, love you babe, but no, you will not be able to make errors like that.

Hephasteus's picture

The Hunt for Dead October

A rogue gay trader falls in love a submarine commander and explores the darker side of financial and nuclear blackmail and terroism. Rated R for too real to handle.

MarketFox's picture


There's WMD in Iraq as well....

Look....the SEC is what it is....a stepping stone to "real paying" jobs on the private side....The SEC will never change....until the SEC is eliminated....and replaced by an entity that really has the proper structure....


Just expect more of the same.....

MsCreant's picture

Would you actually hire anyone who had worked there? Talk about a stain on your record...heh, heh, heh.

MsCreant's picture

Come on folks, how did the stain get on the record???? I'm waiting....

MsCreant's picture

Boy do I want to know what you deleted. Bet it was funny sick.

New_Meat's picture

takes time darlin' to work the thought through - Ned

MsCreant's picture

It's at least double if not a triple. If you apply anywhere, there are tranny porn jokes to live down, then there is the bad job of enforcement, and then there are actual, you know, stains. Nasty, sticky, stains...

But if you have to explain a joke, I suppose it isn't very good, is it Ned?

unum mountaineer's picture's friday. first one to come up with the most innovative and succinct market commentary for this past week in 3 words or less without using the vowel "o" gets some gold chocolate coins. c'mon, make it interesting too..calling all english and journalism majors.