Friday, October 1, 2010

May 6, 2010 Flash Crash

Today, October 1, 2010 the SEC and the CFTC released a report on the unusual trading event of may 6, 2010. On May 6, 2010 the DOW stock index fell the largest ever in one day. The DOW plunged 700 points in a matter of minutes. Mostly, the DOW recovered but, theories immediately began to evolve. There are some thoughts for dairy regarding trading vulnerabilities.

The report is available at:

The report is titled: FINDINGS REGARDING THE MARKET EVENTS OF MAY 6, 2010 and is 104 pages long.

One company trading on the CME caused the event. Waddell & Reed Financial of Overland Park, Kansas was the company which traded a huge volume of emini futures.

So, why should dairy be concerned? The event could have crashed the NY Stock Exchange and there would still be other exchanges in the world. However, the CME Group is virtually it regarding the pricing of commodities, including farm milk. May 6, 2010 was a "liquidity" crisis. If such an uncertainty were to hit the CME Group, the financial world would have no idea of the price and no alternative for pricing commodities. Global system failure are now "hardwired" into the system which prices dairy farm milk.

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