No more 10% falls in less than a minute for No.11 sugar futures

In early February raw sugar futures prices on ICE fell by just under 10% in less than a minute.  Such trades will not be possible from 1 March 2011 when ICE is to reintroduce its implied matching engine.

The change will become effective when ICE’s implied matching engine resumes.  It is not yet clear what ‘acceptable trading ranges’ and ‘acceptable volatility’ means.

The implied matching engine uses an available bid to generate a spread quote which mathematically irons out the possibility of extreme price deviations. Thereby ensuring, in most cases, a correlation between different contracts and preserving the spread differential.

Not the best news for algorithmic traders.  Another proposal is the introduction of circuit breakers to prevent extreme price spikes.  ICE is consulting on the idea.


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