It's all in the timing - CSFB losses 100m pounds

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    From today's times. The last paragraph could be significant for AMP:

    Shares turmoil as FTSE trading breaks record
    By Nick Hasell and Caroline Merrell



    THE FTSE 100 dropped 308 points, or nearly 8 per cent, in the space of just seven minutes yesterday as the London stock market endured its busiest session so far .
    About 1.2 billion shares changed hands in the 20 minutes between 10.10am and 10.30am as futures and options contracts pegged to the FTSE 100 benchmark index expired simultaneously. Not since the late Eighties, when the futures markets were a relatively new phenomenon, has the so-called “double witching” hour proved so volatile.

    Some 5.1 billion shares were traded during the day, shattering the previous record of 4.2 billion, set on September 21 last year, when world stock markets touched their low in the wake of September 11.

    Dealers attributed the frenetic activity to a surge in hedging by institutional investors, who have sought to protect the value of the equity portfolios after July’s stock market falls to six-year lows. Liffe, the futures exchange where FTSE 100 contracts are traded, said that volume in September’s FTSE 100 futures and options contracts was 40 per cent higher than last year.

    Under the quarterly timetable on which those contracts trade, investors were forced to buy or sell underlying shares in the FTSE 100 yesterday to close out their positions or roll them forward.

    Drew Mader, of Instinet, the institutional stockbroker, said: “A lot of people have got positions on, which meant there was a lot of business to be unwound.”

    The record volume of business that needed to be executed in the 20-minute expiry period produced sharp moves in the underlying shares. During the expiry, the London Stock Exchange gave warning that prices were suffering “material delays” of up to three minutes because of the size of the volumes going through.

    3i saw the wildest price swings, jumping from 440½p to 871p. Elsewhere Sage Group leapt from 101½p to 175p, with Rolls-Royce surging from 104½p to 145p. That activity also affected the most liquid stocks in the FTSE 100: BP, Britain’s biggest company with a market value of £96 billion, rose from 425p to 481½p, briefly adding nearly £13 billion to its stock market worth. Similarly, Shell, previously trading at 368½p, ran up to 490p, with Barclays moving 388p to 550p in a matter of minutes The London Stock Exchange said: “We had always expected it to be busy. A number of member firms had let us know that they intended to conduct a lot of principal business at the expiry. It was volatile, but the execution of trading was orderly.” The FTSE 100 finished the day up just 46.6 points at 3,860.1.

    The sharp price moves prompted rumours that a large investment bank was left with a £100 million loss after executing a massive buy order at the market’s intra-day peak.

    Credit Suisse First Boston, the investment bank at the centre of the speculation, denied that any of its traders had made an error that had added to the market volatility. There were also suggestions that an investment bank had sought to keep the FTSE 100 above the 4,000 level to suit its underlying derivatives position.

    Insurers to state equity fall effect

    THE Financial Services Authority has ordered Britain’s 20 top life insurers to give a detailed assessment of the impact on their business of a further decline in equity markets. The move comes amid renewed concerns over life insurers’ capital strength. The FSA said its order was part of “prudent monitoring” of the sector.


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