ANALYSIS - Last-hour U.S. market madness seen abating for now

By Kristina Cooke

NEW YORK (Reuters) - In the past month, traders could have shown up on Wall Street at 3 p.m. and not have missed much.

The last hour, even the last minutes, of trading seemed to be the only ones that mattered in October. But the days of one-hour markets may be waning, at least for now.

Traders say the intensity of these extreme late-day swings -- 443 points on average in the "witching hour" for the Dow Jones industrial average in October -- could let up as some of the so-called forced selling abates.

"I don't think the late-day volatility will be as evident this month," said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams in New York.

A sizeable portion of the last-minute sales came as mutual funds and hedge funds rushed to raise cash in order to pay back investors who wanted their money, analysts said, or in anticipation of such redemptions. Mutual fund redemption orders have to be placed by the last hour in order to be cashed out at market closing prices, boosting late-day volatility.

"The fiscal year for the mutual funds ended last week, so that selling should slow down a little. And most hedge funds should know what they have to sell out of for the year by November 15," Rovelli said.

Peter Kenny, managing director at Knight Equity Markets in Jersey City, noted that hedge funds "that were heavily levered in the commodities space have already liquidated a significant portion of their holdings."

In fact, volatility on Monday, the first trading session of November, was the most muted since before the Lehman Brothers' bankruptcy on Sept. 15. But this was likely as traders were unwilling to place big bets before Tuesday's U.S. presidential election.