Fast Market

Fast Market - Autumn Fairie by josefa
Fast Market

Fast market conditions are categorized by heavy trading, highly volatile prices, and a great uncertainty about the equilibrium price. These conditions are often the result of an imbalance of orders and bid-ask spreads may be wider than normal, potentially much wider.

Whenever price fluctuations in the pit are rapid and the volume of business is large, the pit reporter, upon authorization of the pit committee chairman or his designated representative from the pit committee, activates the “fast market” indicator clearly visible to the entire trading floor.

The fast market labeling indicates that brokerage customers cannot expect their orders will be executed at the best published prices when the market is trading fast.

In the middle of a fast market, brokers may be unaware of the best execution price for their clients. However, a fast market designation does not nullify or reduce the floor broker’s obligation for executive care to execute orders according to the terms of the order.

Open outcry markets handle fast markets surprisingly well because a trader can change his previous bid or offer, simply by a hand signal and a verbal announcement. However, the danger of fast markets in open outcry is the increased risk of an out-trade.

In contrast to this, the response time (elapsed time between the submission of a trading request and the system confirming or rejecting the action) of electronic matching systems, which normally do not generate any out-trades, decreases in fast markets as message traffic increases because of the rapid and numerous alternations of the bids and offers.