A jumpin’ Jack flash in aluminium | FT Alphaville

A jumpin’ Jack flash in aluminium

First there was the flash crash.

Then there were mini flash crashes.

Now, welcome to the cross-fire hurricane of cross-asset jumpin’ Jack mini flashes.

The development first raised its ugly head last week, when cocoa futures on the ICE exchange slumped more than 8 per cent only to recover immediately. The move drove an equally sharp slump in the iPath Dow Jones-UBS Cocoa Total Return Sub-IndexSM ETN.

Zero Hedge now draws attention to yet another mini flash crash, this time in the stock of Century Aluminium on Monday, which fell 17 per cent before recovering immediately (chart via Bloomberg):

But was the above move associated in any way with the cancellation of more than 200 lots of aluminium on Tuesday at the London Metal Exchange?

As Reuters reports, prices of aluminium also dropped precipitously for a few seconds on Monday:

Prices of aluminium fell by more than 3 percent for a few seconds early in the day before recovering after what traders described as a “big figure typo”. “It was unfortunate. We picked up a bit and I was telling a client we had a great fill for his order when the message on the cancellation came through,” one dealer said.

“It was a good thing Shanghai was shut. Had you opened an arbitrage at that point, you’d end up holding a position in one market, while the other half of your transaction was canceled.” Chinese markets, including the Shanghai Futures Exchange, are closed until Friday for National Day holidays.


Another trading source said the exchange had sent a message to LME Select users that all trades for primary aluminium at 0100 at a price of $2,286 would be cancelled. Traders estimated more than 200 lots, or more than 20 percent of the volume traded by 0721 GMT, could be caught up in the cancellation, worth around $11 million to $12 million. No one from the exchange’s Singapore office was immediately available for comment.

The mystery lingers on — for now.

Related links:
Market on edge after Apple drops like a stone
– FT Alphaville
The non-role of internalisers during the flash crash
– FT Alphaville
All eyes on broker-dealer internalisation
– FT Alphaville