MATIF INTRODUCES TEMPORARY FREEZE PROCEDURE

Paris, August 4, 1998 -- Starting Monday, 10 August 1998, Matif SA will adopt procedures providing for a temporary freeze in trading of all of its futures contracts. Except in special circumstances, trade in contracts for a given delivery date will be frozen if the price shows a swing of 25% or more (up or down) against the previous day's fluctuation limit (1). The freeze will give Matif SA time to contact the issuer of the order and determine whether the price swing was the result of normal trading or if it resulted instead from an error. The order triggering the freeze will be eliminated from the system without being executed if its originator, contacted within two minutes following entry of the trade into the system, requests that it be removed, or by default if the trade represents more than 500 lots. If the order was not erroneous, the trade will be executed as normal.

This new procedure is being adopted in response to several wide and sudden swings observed on Matif in recent months, most notably on Thursday, 23 July 1998 for the Notional contract. It is aimed at enhancing the market's price formation mechanism.

Regulations governing cancellation of orders(2) applied on Matif since 14 May 1998 have made cancellations very rare. These regulations remain unchanged.

(1) The daily fluctuation limit is based on the previous day's official settlement price, and represents:
  • 140 basis points for the Notional and Euro Notional contracts
  • 80 basis points for the Matif 5-year contract
  • 35 basis points for the Pibor contract
(2) In keeping with market regulations governing trading, and more specifically in compliance with articles 2.3.4 to 2.3.11 of these regulations, Matif SA may cancel a trade made on the NSC electronic trading system as follows:
  • if the trade results from "an input error". In this case, Matif SA must be informed of the request by telephone "within 15 minutes following execution of the trade". Matif SA then determines the difference between "the trade's execution price and reference price", the latter being set by Matif SA "based on market information available at the time the trade [for which cancellation is requested] was executed". If the "actual variance exceeds the instrument's threshold variance [as] established by Matif SA" which is 25% of the daily fluctuation limit for firm futures contracts, "Matif SA cancels the trade partly or totally" after securing the agreement of the counterparty.
  • in the case of "an obvious input error" as assessed by Matif SA, Matif SA can cancel the trade "without the counterparty's agreement and even if there is no cancellation request."

Contact: Antoinette Bouvier-Darpy - tel. +33 (0)1 49 27 11 31

© Matif SA - 1998