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Market suffers from lack of liquidity & transparency
07
Mar '08
We could not find sellers on the way up and now there are no buyers on the way down as we continue to suffer from a lack of liquidity and transparency in the market which has traded synthetically four days in a row.

The overnight open was lower and gradually found enough sellers to reach limit down and eventually traded as low as 78 cents synthetically based K'08! The market bounced back and almost came off the limit, but settled 250 pts lower synthetically @ 82.70 based K'08, 84.80 N'08 and 89.10 Z'08.

This first week of 100% electronic trading has had historic volatility and created a synthetic trading range in the spot month of almost 30 cents trading as high as 106.00 on Tuesday and today's low of 78.00. Volume was 41,000 futures and 116,000 options as we are now seeing the profit taking from panic short covering early in the week.

Obviously, this type of trading environment can only be beneficial for specs and ICE shareholders. Any member of the cotton industry including mills, producers and merchants who use the futures and options to hedge physical cotton are unable to benefit from a market that trades with theses erratic swings.

We were expecting some consolidation today based on the overbought conditions and the fact that profit taking had started to enter the market. It is hard to say where the buying will enter the market but after closing under the limit, there is a good chance we could test the 80 cent level in K'08 where wewould return to 300 point limits once again.


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