Trading in US stock futures had to be halted after violent moves, and markets are spooked

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  • An unusual move in US equity market futures this morning triggered a market intervention by CME Group, the world’s biggest futures exchange.
  • CME had to halt trading for brief periods “to enter the market preventing even harder moves”.
  • Traders are unsure what caused the move, which has caused an extra bout of nervousness for already skittish markets.
  • Markets are in risk-off mode across Asia today, with some analysts attributing the falls to the arrest in Canada of Chinese tech giant Huawei’s CFO.

SYDNEY — The world’s largest futures exchange, CME Group, had to repeatedly halt trading in US stock futures for brief periods this morning because of violent price moves, in an unusual intervention that has stunned traders.

US stock futures reopened this morning in Asia after an unscheduled closure to mark the funeral of former President George H.W. Bush on Wednesday. Tuesday’s trade saw Wall Street selling off heavily, with the key indices down around 3% and the Dow down 800 points.

When futures re-opened in the Asian trading day on Thursday, stock futures plunged again, falling up to 1.9%. (They soon recovered and a short time ago were down just over 1%.)

It was during this opening in trade that CME Group intervened to manage the volatile trading activity, putting a stop to algorithms closing orders.

The price action caused several CME “Velocity Logic” events, which are triggers to halt futures trading when price movements move too far, or too fast in a given direction.

CME announced this morning that it intervened to prevent steeper falls in US equity futures.

A note from an institutional clearing desk in Sydney sent to traders and seen by Business Insider said:

CME experienced multiple Velocity Logic events from the open in Equity futures today. It caused several 10 second pauses where limit orders were accepted but market/IOC orders were rejected causing multiple algo slices to get rejected. The pauses allow participants to enter the market preventing even harder moves.

According to Bloomberg, markets are unsure what caused the move, with some speculating that it may have been sparked by an accidental “fat finger” trade.

Elsewhere in markets, news broke overnight that Wanzhou Meng, the Chief Financial Officer (CFO) of privately-owned Chinese tech giant Huawei, was arrested in Canada at the request of the US and now faces extradition.

According to reports, she was arrested on suspicion of violating the US’s trade sanctions on Iran.

Stephen Innes, head of Asia-Pacific trading at foreign exchange company OANDA, said he is “directly attributing” this morning’s fall in S&P500 futures to the Huawei development.

“This news is quite significant, as the US government is attempting to persuade allies to stop using Huawei equipment due to security fears,” Innes said.

“Recall that over 100 Chinese companies traded limit down when news broke the US had urged allies to blacklist Huawei” in late November.

A short time ago, Asian stock markets were trading lower across the board in midday trade, with Hong Kong’s Hang Seng Index down more than 2%.

The moves were part of a broader risk-off tone in Asia, with gold higher while the safe-haven Yen has performed strongly against all major currency pairs.