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Eurex’s welcome transparency

"Absence of news, finding reasons for the rise or fall of a stock price can be a very difficult thing.

"With so many actors seeking different outcomes, sometimes offering precise reasons is close to impossible. Furthermore, as a stock market reporter a decade ago, I learnt that traders could also come up with post-event explanations at remarkable speed.

"Many did not stand up to a moment’s scrutiny. One learned not to offer plausible reasons as they would be voraciously pounced on. The conversation, and by extension my call, could be moved on.

"This daily “trader tango” came to mind in recent weeks in the wake of two separate sudden movements on European markets. The first was a near 10 per cent spike in shares of HSBC on the London Stock Exchange on January 30. The second came just days later when the Eurex futures market dropped 2 per cent in the seconds following the European Central Bank’s decision on interest rates on February 6.

"There was nothing to explain the HSBC move while the ECB decision was widely expected. After examining the evidence, both exchanges allowed the trades to stand, indicating they saw nothing untoward. Without a specific reason, the market quickly attributed the moves to a “fat finger”. That was an especially odd explanation for the HSBC move as it took about 5 seconds to move so far."


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