Intercontinental Exchange and CME Group tanked this week because somebody somewhere is mad about perpetual futures regulation. Perpetual futures. The financial instrument that sounds like a prog rock album nobody asked for.
Retail traders saw "most oversold" and immediately started salivating like Pavlov's dogs if the dogs also had Robinhood accounts and a fundamental misunderstanding of what the RSI indicator actually measures. They bought the dip. The dip kept dipping. Tale as old as time.
The regulatory spat in question remains delightfully vague. Could be the SEC. Could be the CFTC. Could be some bureaucrat in Brussels who just learned what crypto derivatives are and decided to ruin everyone's week. Nobody knows. Nobody cares. The stocks went down anyway.
CME Group operates the world's largest derivatives marketplace. Intercontinental Exchange owns the NYSE. These are not exactly penny stocks run out of a strip mall in Boca Raton. But technical indicators don't discriminate. The RSI dropped below 30 and suddenly every twenty-three-year-old with a YouTube channel started screaming about value opportunities.
Here's what actually happened. The market had a turbulent week. Turbulent is financial journalism's way of saying it went down and we don't want to say crash because that word has legal implications. Stocks got sold. Some stocks got sold more than others. The ones that got sold the most are now called oversold because we needed a word that sounded scientific.
The exchanges that facilitate trading got hammered during a week when everyone was trading. Think about that for longer than three seconds and your brain starts to hurt. It's like a fire station burning down during a five-alarm fire.
But sure. Buy the dip on the companies caught in a regulatory turf war over an instrument called perpetual futures. What could possibly go wrong in perpetuity.
Photo by Maxim Hopman on Unsplash
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