CME disconnects again amid delivery test: Will March silver repeat the short squeeze?

Starting at 12:15 PM Eastern Time on February 25, the CME Group’s Globex platform experienced a “technical issue” that caused approximately 1.5 hours of trading interruption for metal futures, including gold and silver. Natural gas futures were also paused for 35-50 minutes. During the suspension, CME announced the cancellation of all valid orders for the day and GTD (Good-Til-Date) orders marked to expire on that day, leaving only the institution-preferred GTC (Good-Til-Canceled) long-term orders. On November 28 last year (the first notice day for December silver delivery), CME’s rare “disconnection” incident occurred again.

The timing of this incident remains sensitive, less than 48 hours before the March silver futures first notice day (February 27), at a critical moment when silver prices approached the key resistance level of $92 per ounce and short sellers faced additional margin pressure. Before the outage, COMEX silver futures briefly touched $91.98, with an intraday increase of over 4.7%. After the system was restored, silver prices quickly plunged, ending at $89.86, giving back most of the gains.

From a microstructure perspective, the main users of same-day valid orders are retail traders and short-term momentum algorithmic funds pushing prices higher; while GTC orders are typically placed by market makers and large institutions setting deep water limit orders to control price ceilings. This CME operation caused an instant depletion of buy-side depth after system restart, forcing aggressive longs to manually re-enter orders, while the shorts’ defenses remained intact.

In our January 31 article, “Silver’s Largest Intraday Drop of 37%! A Structural Liquidation Triggered by Rules and Leverage,” we explained that “CME’s incentive mechanism and primary goal are to prevent liquidation failures, not to control price movements. During extreme market volatility, increasing margin requirements is the fastest way to reduce tail risk,” and that “this rule-triggered structural liquidation has wiped out a large amount of long leverage, preparing for the continued physical delivery in March.” We also warned on December 29 that CME might again experience a low-probability event of trading suspension due to technical issues. Before the outage, the open interest for March contracts was high, with potential delivery scales exceeding 100 million ounces, and the paper claims temporarily surpassing the registered inventory of 88 million ounces.