What happened
According to
the statement published by Dow Jones Index, the heavy trading volume caused a 70 minutes delay in the calculation of Dow Jones Industrial Average on Feb 27th, around 2pm. The market data feed for the underlying prices was congested. When the problem was resolved by switching to a redundaent market data system, DJIA suddenly moved to its correct level, causing an almost 200 point drop in 5 minutes.
Effects on Future and ETF
Originally I thought this would cause a bit of chaos in the DIA ETF and Dow Future, both track the value of the index. However,
this post compares the intraday charts and reached the conclusion that both the ETF and Future were tracking the correct value of the index all the time. The algorithm trading system at the index arbitrage desks must have been working very hard to squeeze profit out of the system (and eliminating the very arbitrage opportunity at the same time).
Was there an arbitrage opportunity?
Here is some discussion on the subject. I think this eventually boils down to the question of whether there are traders using DJIA as a reference for Future or ETF trading. If these poor souls do exist, they would be trading at wrong prices and give more informed traders immediate profit opportunities.
