CME Velocity Logic is a technical safety mechanism, not a volatility halt or regulatory circuit breaker. Its purpose is to protect market integrity when price moves faster than available liquidity can support. Velocity Logic addresses mechanical breakdowns in market structure, not expected volatility from news or the market open.
It may help to think of Velocity Logic as an airbag -- it activates only when something mechanically fails.
What Is a Velocity Logic Event?
A Velocity Logic Event is a brief, automatic pause that occurs when price moves too far, too fast within a micro-time window and the order book cannot refresh with sufficient liquidity.
The CME monitors:
Tick distance (how far price moves)
Speed (how fast it moves)
Liquidity replenishment behind the move
If predefined speed thresholds are exceeded without enough resting liquidity, trading in that contract is temporarily paused.
What Happens During a Velocity Logic Event?
Duration: Typically 2–10 seconds
Market State: Reserved / Pre-Open
Trading Activity:
No trades are matched
Aggressive orders that caused the event are canceled
Purpose:
Stabilize the order book
Allow liquidity providers to refresh quotes
Following the Velocity Logic Event, trading resumes normally, often with a small price gap.
Why does Velocity Logic Exist?
Velocity Logic protects the matching engine and market structure by preventing:
Runaway algorithms from clearing the book
Liquidity vacuums causing unrealistic price moves
Stop-loss cascades driven by an empty order book
Short-term mechanical instability
Velocity Logic vs. Volatility
High volatility alone does not trigger a Velocity Logic Event. During events like the release of CPI information, FOMC decisions, or NFP reports, or at the market open:
Liquidity remains continuous
Market makers are active (though wider)
Orders continue filling normally
Velocity Logic only triggers when liquidity collapses or the market’s mechanics cannot keep pace with price movement.
When Velocity Logic Events Typically Occur
Overnight or low-liquidity sessions
Algorithmic malfunctions
Stop cascades after sudden book thinning
Data feed or quote disruptions
Velocity Logic events rarely occur during high-participation periods.
Key Takeaways
A Velocity Logic Event is a liquidity warning, not a volatility signal
Stop orders are not protected and may suffer severe slippage
Position sizing must assume worst-case fills, not ideal execution
Chasing price immediately after a Velocity Logic Event increases risk