Has any financial market voided hours of trading worth over $1 billion USD?
Upvote:2
It is impossible to prove a negative, but I'm going to offer a model/hypothesis that may help to understand why (I think) voiding contracts in the financial markets are less likely.
It is possible that this event is simply poor reporting -
All orders not filled by the end of a trading day are deemed 'unable' and void, unless they are designated GTC ( Good Till Canceled) or open. CFTC
This would also reconcile our early confusion over "cancelled" vs "voided".
Cursory research also indicates that the LME is a futures and options market; I'm assuming (although I can't find any direct citation) that all contracts written on the LME are [voidable contractshttps://www.investopedia.com/terms/v/voidable-contract.asp)
If this were true, then when the LME halted trading, then all unfilled contracts were voided. If this is what really happened, then it should be relatively easy to find similar events in financial markets. Financial market have circuit breakers aka trading halts built in - when one of these triggers, it should result in a large number of unfulfilled contracts which are automatically voided.
If this theory is correct then the US Flash Crash probably answers the question, although I can't find any record of the value of unfulfilled (and consequentially voided) contracts.
If, on the other hand, the LME actually voided contracts that had been filled, then I suspect that this could occur only because the LME is affected by external supply shocks in a way that financial markets really can't be.
I infer from list of market corners that the difference is that the price of nickel soared in a way that is very unlikely to happen in financial markets.
The external events that could suddenly affect the supply /demand for a financial instrument are highly regulated in a way that international nickel production cannot be. Nickel is a international commodity product; financial products by definition exist with a national regulatory framework. While the national regulatory frameworks are designed for other objectives, they have the effect of regulating and discouraging the soaring prices. My hypothesis is that sudden surges in the prices of a financial instrument would generally be the result of fraud or manipulation, and the financial markets constantly exercise their powers to avoid these events.
the Economist suggests that actual trades were cancelled, not just potential contracts
. . . as a short-covering scramble for nickel briefly pushed prices above $100,000 a tonne on March 8th, putting Tsingshan’s potential losses into the billions of dollars. At that point the LME suspended nickel trading, cancelling all trades that took place overnight.
I continue to believe that the core issue is differing regulatory regimes between the LME and financial markets, but I haven't found a solid source to test that hypothesis.
This is not a good answer, but having preached against long comment strings, I'm obliged to delete my comments and enter an answer. I also can't find nearly enough citations to support my hypothesis. I'm going to leave the answer here in case I find something later, or in case someone out there can improve on my research.
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