Why was the ES Globex market shut down?
On the morning of October 24, 2008, a Friday morning, I started getting calls from some of my students asking questions like: what happened to the data overnight? Why did the ES Globex market shut down? What does it mean when you have a “Limit Down” shutdown?
I dedicate a special website at www.AskNateBrooks.com for people to ask questions where I focus on replying to questions submitted by dedicated entrepreneurs like yourself. Today, my goal is to simply talk about the “limit down” rules. My focus here is to mentor and coach people(novice and professional traders) to achieve success rather quickly with our Traders Advantage Methodology mentoring program.
Simply stated, the Chicago Mercantile Exchange and the New York Stock Exchange have rules in place to attempt to stop the market from completely going into panic mode if certain numbers are reached.
Equities tumbled worldwide overnight on concerns that the global slow down in earnings will cause the values of equities to plummet in every country. Around the world, the markets dropped 7% to 10% and the December ES futures (S&P 500 futures) fell 60 point to 855 overnight. At about 3:30 am Central Time, after a drop of more than 6 percent triggered the “limit down” shutdown on the Chicago Mercantile Exchange.
These “circuit breaker” rules are designed to shut down the markets in a way to give people a chance to clear their heads so that they don’t just start panicking.
When the ES (S&P 500) futures shutdown, it meant that it wouldn’t trade below 855 until U.S. exchanges open. The “limit down” suspension allows the contracts to trade above those levels but not below those levels.
The CME Group ES Index Futures Daily Price Limits are that a 5% up or 5% down in the Overnight Market would trigger a suspension in trading…that’s what happened. Then, during the day there are a 10% Limit Down only…then a 20% Limit Down only…then a 30% Limit Down only that would trigger a suspension in trading.
If you are planning on trading in a market like this, I strongly recommend that you go to the CME Group’s website for the complete rules and procedures. For example, if limit down rules on the NYSE cause the “circuit breaker” rules to suspend trading on the NYSE, all futures markets trading would be suspended during that time period.
As you can surmise, the rules are somewhat specific and you should KNOW what you are doing before attempting to trade on days like this.
Other things you should be aware of is that you can EXPECT lots of volatility. That means you will have to widen your stops as you trade in this volatile market or just sit on the sidelines. As an example, today the VIX reached another all time high… going above 89 for the first time in history…that means…“people are scared to death”…and, probably for good reason… Chrysler announced today that it was going to layoff 25% of it white collar workforce in November.
Odds are you are going to hear lots of news like this for a long time. However, it is NOT the time to be fearful…IF YOU HAVE SKILLS. You must take the time now to learn skills that can help you make money in this economy. Lots of money will be made every single day…make sure you learning how to take control of your finances and your life, BEFORE you are forced, so you are not dependent on a job…that may just disappear as the companies are forced to start laying people off in order to survive. When these companies have to lay off people, it doesn’t matter if you were doing a good job, if they need to cut “deep”, they will lay off a lot a nice people…make sure you are taking control of your own future.
Trading is the best “one person” business in the world. Go to www.NateBrooks.com to start learning how to take control of your finances and your life. If you have any other questions, please feel free to submit your questions to www.AskNateBrooks.com, I will be happy to provide you with the answers to your questions.