After nearly five months, federal regulators have been able to dissect the events of May 6, the day when the Dow plunged almost 1,000 points.

A joint report issued by the Commodity Futures Trading Commission and the Securities and Exchange Commission (SEC) pieced together that day's events and came up with this finding, as reported in the Wall Street Journal. A computerized trading program run by a Waddell & Reed trader automatically sold 35,000 e-mini S&P contracts. These contracts mirror the larger S&P contracts. The trader's program was triggered at 9% of the trade volume.

Continue reading Flash Crash Report: What Really Happened?

Flash Crash Report: What Really Happened? originally appeared on BloggingStocks on Sat, 02 Oct 2010 09:40:00 EST. Please see our terms for use of feeds.

Think you can tell which upcoming motion pictures will be blockbusters and which will be bombs? If so, you may get the chance to put your money where your mouth is.

For years, Wall Street investment firm Cantor Fitzgerald has been operating a so-called Hollywood Stock Exchange, which allows players to trade faux stocks in upcoming films; specifically, "investing" in box office futures. Cantor Fitzgerald is now seeking permission from the Commodity Futures Trading Commission (CFTC) to allow players to invest for real.

Continue reading Hollywood Stock Exchange: Betting on the Box Office

Hollywood Stock Exchange: Betting on the Box Office originally appeared on BloggingStocks on Sun, 14 Feb 2010 13:20:00 EST. Please see our terms for use of feeds.

Here's a bit of juicy news. According to the Wall Street Journal (subscription required), The Federal Trade Commission (FTC) plans to crack down on market manipulators. They have decided to levy fines up to $1 million dollars per violation a day. The rule covers both physicals and futures.

The crackdown involves mainly the oil traders. Specifically, the language reads as follows: It bans oil market players from issuing "false public announcements of planned pricing or output decisions, false statistical or data reporting, and wash sales intended to disguise the actual liquidity of a market or the price of a particular product." The rules would also prohibit "material omissions from a statement that, although true, is misleading under the circumstances."

Continue reading FTC plans a crackdown on market manipulation

FTC plans a crackdown on market manipulation originally appeared on BloggingStocks on Fri, 07 Aug 2009 13:30:00 EST. Please see our terms for use of feeds.

On the other side of argument, one which argues that market forces set the price, some cotton merchants themselves were trading aggressively; a little-used exchange rule suddenly required merchants to unwind sell orders; and financial investors, including pension and hedge funds, started to enter the market, which generated an eight-fold jump February 19-26 in net buying, The Journal reported, citing CFTC data.

Continue reading Cotton price spike mystifies traders, prompts inquiry

Cotton price spike mystifies traders, prompts inquiry originally appeared on BloggingStocks on Wed, 13 Aug 2008 12:20:00 EST. Please see our terms for use of feeds.

Continue reading Hedge funds reduced positions in oil futures as prices rose, probe started

Hedge funds reduced positions in oil futures as prices rose, probe started originally appeared on BloggingStocks on Mon, 02 Jun 2008 14:57:00 EST. Please see our terms for use of feeds.

U.S. regulators Friday disclosed a broad nationwide investigation into potential oil-market manipulation and said they are expanding surveillance of energy markets, The Wall Street Journal reported Friday.

The Commodity Futures Trading Commission announcement of an ongoing and widening inquiry occurs amid a 4-year rise in crude oil prices in which gasoline, diesel, and heating oil prices hit record highs, Reuters reported Friday.

Oil closed Friday up 73 cents to $127.35 per barrel. Oil has risen about 100% in the past 12 months.

Many Congressional officials and consumer groups have been arguing for a systematic investigation into futures prices, asserting that institutional investors and other speculators have manipulated oil prices and driven them "artificially higher."

Others, including economists and oil executives, argue that the price increases have more to do with the sector's bullish fundamentals, including inadequate crude oil production growth amid rising demand.

Oil Analysis: Strong evidence suggests that the bulk of oil's 4-year bullish run is rooted in fundamentals, with the reduction in the global safety cushion -- the spare oil between daily global oil supply and demand -- accounting for today's near-record oil prices. Still, that's not to say a rigorous inquiry would not yield compelling data or new insights. One area of interest that the inquiry will explore: whether oil storage operators have issued misleading information about oil in their tanks to profit from oil trades, Reuters reported Friday.

Regulators to probe possible price manipulation in oil market originally appeared on BloggingStocks on Sat, 31 May 2008 10:10:00 EST. Please see our terms for use of feeds.

The market was looking like it would open up this morning. That is, until 8:30 a.m. when the wholesale inflation report came in at more than twice the rate economists had expected. Now the market is expected to drop. Will the Plunge Protection Team (PPT) step in as it may have done yesterday?

The reason the market reversed is that with higher than expected inflation, the Fed is less likely to cut interest rates. The Fed wants to keep core inflation between 1% and 2%, but when the PPI rises 1.3% in a month -- instead of the expected 0.6% -- investors fear that the Fed will need to raise rates to keep inflation within its target range. Is the Fed serious though? Last week, a productivity report noted that unit labor costs rose 6.6% in the last quarter of 2006. Although bonuses figured into the statistic, the slower growth in productivity suggests that wage inflation could be a future concern.

My guess is, though, that the Fed has a more complex goal -- it's torn between the desire to control inflation and the need to avoid sinking the economy too much. As this report from Fortune suggests, people with adjustable rate mortgages can get into trouble quickly when those rates rise. With two-thirds of economic growth coming from consumer spending, a rise in interest rates could then reduce the heavily leveraged consumer's ability to keep spending.

Continue reading Inflation up, will the Plunge Protection Team step in today?

Inflation up, will the Plunge Protection Team step in today? originally appeared on BloggingStocks on Thu, 15 Mar 2007 09:42:00 EST. Please see our terms for use of feeds.