| Imperial Date 360-1106 |
| Date 01-54-1106 |
Futures trade fiasco puts ESM in tailspin. The Efate futures exchange "Efex" (part of the Efate Securities Market) was embroiled in a major row yesterday after it cancelled an unusually big trade, which left many of its members sitting on large losses. The "1107 year-end" futures contract on EAX, Efate's index of leading shares, dropped almost 800 points from an opening level of 5,143 within half an hour of a trader hitting the wrong buttons. It is believed that the trader was intending to sell one futures contract when the market hit 5,180 but instead sold 5,180 contracts, which sent the market into freefall. It was unclear yesterday where he worked.
The dramatic move triggered many electronically programmed trades, set up to automatically sell futures contracts once they hit a certain level. It also led to a major sell-off in the contract of Efate Stoxx, an index of leading Efatian company shares. It opened at 3,807 but, within minutes, lost over 20% to hit 2,985. Traders said that movements in the Efate Stoxx contract are very closely linked to the EAX contract. Five hours after the massive sell-off in EAX contracts, Efex announced that trades below 5,083.5 would be cancelled. However, it took a further two hours for confirmation that trades on Efate Stoxx50 would be cancelled below 3,726.
The news led to outrage among members of Efate's futures exchange, which is traded exclusively on electronic screens. One trader said: "This is un-bloody-believable. It is a complete mess." They were angry because trades initiated as a result of the dramatic slump had not been cancelled, leaving them nursing hefty losses. There was also outrage at how long it took Efex to announce its decision. One trader said: "If they had left the initial mis-trade as it was, then I estimate it would probably cost the bank involved about MCr30. Instead, the bank has been saved and I and all the other members suffer."
It is understood that many traders took the opportunity to buy both indices when it hit such low points, and then sold them when the market recovered at a much higher level. "I bought the market when it fell and then sold it when it reached a much higher level," explained one banker. "Now my first trade has been cancelled, but my second one hasn't because it was above the cut-off point. I have lost money and I am furious. The guy involved must have been an idiot. All through the trading process it says things like `are you sure?' It is meant to protect us from making errors." One Efex insider said: "These guys are professional traders, they must have known this was a mis-trade and would be cancelled. They expected to profit from somebody else's error and now are complaining because they couldn't." However, futures traders rejected suggestions that they had capitalised on somebody else's misfortune and pointed out that a recent mis-trade by a Broman Bank employee was not cancelled, even though it also led to a dramatic swing in the market. "How do we know when they are going to consider it a mis-trade? Do they want us to sit on our hands?" said one. A Efex spokesman said: "It did not take a long time. We have to get the information but a company has to first register that it was a mis-trade. We informed the market as quickly as possible."
Weather:
| Lakatoro | | | Aniwa | | | Emaé | | | Tanna | | | Port-Vila | | | Hammer Bay |
 | | |  | | | | | |  | | |  | | |  |
| | | | | | | | | | | ||||||
| overcast | | | rain | | | rain | | | sunny | | | storm | | | clearing |
NTV News is broadcast in digital on news.ntv.com and comm channel 21. News bulletins every hour on the hour.