ICE may reinstate automated price generation

ICE raw sugar futures volumes are at five month highs at over 209,000 contracts.

ICE may reinstate automated pricing for its sugar contracts in an attempt to decrease volatility and price spikes said to be caused by algorithmic trading.  Volumes are higher since ICE automated price generation was last used in 2009.  Automated price generation helps generate bids and offers more closely replicating pit trading and maintaining fair value between contracts in different months, thereby eliminating some arbitrage opportunities.

In light of rising commodity prices, increased volatility and calls for greater transparency, exchanges are considering various ways to achieve such objectives.  In January 2011 ICE delayed the start of its Cascading Stop Mitigation system aimed at overcoming some of the impacts of algorithmic trading and pre-specified orders on the ICE platform.

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