And the carry trade/currency weirdness continues:
LONDON (Dow Jones)– U.K. bank Barclays Capital pulled yen prices off its Barx dealing system for a short period Wednesday, as the Japanese currency fizzed to its strongest levels on record, a person familiar with the situation said Thursday. In a spectacular move, the dollar collapsed against the yen at 2100 GMT Wednesday, sinking 4% to hit a record low of Y76.25.
Most big banks’ systems functioned normally during that hectic period, albeit with a markedly wider spread between where the banks were prepared to buy and sell the currency–a feature that reflected extreme market stress and uncertainty. But Barx was unavailable, a Switzerland-based user said.
“All of the banks showed wide spreads–they went into panic mode,” the Barx user said, speaking on condition of anonymity.
“But I use six banks, and of them, only Barx was down,” he said, adding that he was unable to trade yen on the system for an hour.
A person familiar with the situation said Barx didn’t experience any technical difficulties, but the bank’s traders decided to pull prices from the system to protect themselves during hectic trading conditions at what is normally a quiet time of day.
Barclays Capital said in a statement: “Due to unprecedented volume in yen based currency pairs, we extended our normal daily reset time period between NY/Asia time zones. Subsequent to this, we maintained superior yen pricing through a period of extremely high volume without interruption.”
Quite a big deal for a bank that prides itself on an “award-winning FX platform,” providing “traders 24-hour, two-way executable streaming prices in over 50 currencies and 300 currency pairs.” Just, erm, not when they’re really moving.
What’s the deal? Algorithms gone wild? Too much volatility for variance swaps?
What?
Related links:
Volatility as the new Black-Scholes - FT Alphaville
The derivatives hour for the Japanese yen – FT Alphaville
Why trading machines don’t like news releases – FT Alphaville
HFT correlations at BarCap - FT Alphaville