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ESH0 Volume Spike Explained: Fat Finger Results In 2 Point Jump In Market
Courtesy of reader vertek7, we find out that today's crowning moment of S&P manipulation was purely a function of yet another fat finger. We say manipulation, because while according to the CME the two 200,000 ESH0 block trades allegedly offset each other, the market ended up shooting higher as a result, which was likely driven purely from favorable robotic interpretations of the volume spike. This market is so broken, and so upward biased, the mere observation of abnormal volume activity is sufficient to gun it higher. Also, can someone please explain how 200,000 e-mini contracts can possibly trade without soaking up all of the advertisied bid and offer side on the NBBO? HFT - meet e-minis. We hope the SEC is reading and comprehending (albeit ever so slowly) all of this, while it solicits public commentary to find out just how fucked up this market is.
-----Original Message-----
From: CME Globex Control Center
Sent: Wednesday, January 13, 2010 4:54 PM
Subject: ESH0 Event
Importance: High
Between 11:03 and 11:04 CT today, there were a series of transactions in
ESH0 in which a market participant appears to have inadvertently traded
approximately 200,000 contracts as both buyer and seller. CME maintains
trade practice and risk management rules and procedures respecting such
matters.
In keeping with standard practices and CME's self-regulatory
responsibilities, CME is reviewing the circumstances of this event.
»
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short cme into earnings
the 1-2 days before
Hmmm, This is why, when the market blows, it'll be be down big time. There is NOTHING, fundamentally, even technically (the weekly MACD has been positive for nearly 10 MONTHS - apart from just before Christmas where it slipped , briefly and only just, into negative territory) that supports the current levels of the stock market. Bubble? I don't know, but with all the news and figures that come out (the latter, looking beyond the headline figures) it certainly seems that way. DavidC
technical analysis/indicators don't work tho.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1181367
While we cannot rule out the possibility that technical analysis compliments other market timing techniques or that trading rules we do not test are profitable
why would you read this? lol
"hello MACD, you're looking so pretty today"
I say Bullshit that this was an "inadvertant" trade.
The market at that moment was at a support/resistance level and a cross-over level and thus that spike clearly signalled a breakout to the upside.
Several intraday MA's had converged and were turning up; and the transaction occurred precisely at the daily PP.
Put a chart up and you will see it.
Dude,
Seriously, this was 200,000 contracts that went thru in about 5 seconds. I highly doubt it was due to daily pivots and moving averages. Move on from those amatuer indicators. I have never seen that kind of volume in that time frame and have the market only move 2 ticks. It wasn't 2 points. The after effect was 2 points, but the volume came in at 37.25 and 37.50, that was it. Watch the tape and price action, it has more tells than any indicator.
I saw 1 million and 1.5 million share sells of Alcoa today. Neither budged the stock price more than a penny. The million sell was followed almost 60 seconds later by a million buy. The 1.5 million sell wasn't followed by a compensating buy, but it didn't move the chart, despite representing about 2.5 percent of the entire day's volume.
The PPT has soft hands. The dark pools have deep pockets.
All wash trades are inadvertent after you get caught. Seriously, this is how Enron used to manipulate the California power exchange. How did that turn out?
Email came from http://www.cmegroup.com/globex/trading-cme-group-products/gcc-support.html
ES1 1hour avg into the last hour of trading is 250k-300k. Opening/close ES 100k are considered big trades. I didn`t check the data but some other other gentleman posted this was the biggest ES trade ever in 1' and mkt moves only 2pts...
That breakout from this trade resulted in an 8 point up move for the S&P 500.
ran some stats on this earlier on a 30min chart, in the past year this vol spike ranks #60 out of ~1171 bars putting it in the upper 0.5% on 24/hr continuous contract.
TD, no matter your age, gender, weight, height, etc., your brain makes me want to do dirty, bad, naughty things to you. ZH staff and frequent posters, sometimes you're the only archipelago of sanity in my entire day. seriously, love this joint.
" This market is so broken, and so upward biased, the mere observation of abnormal volume activity is sufficient to gun it higher"
That doesn't sound like a trend you want to fight.
"the market ended up shooting higher as a result, which was likely driven purely from favorable robotic interpretations of the volume spike."
I f that's all it takes to spook the bots a lot of traders will be tempted to exploit it.
Count this trader as one who isn't fighting it.
I'm as bearish as the next guy on the endgame in regards to the market specifically, and the economy generally. But I'm not about to leave the money to be made in this gamed market on the table.
In one word: BULLSHIT.
Gosh, who would "manipulate" the stock market through futures and why....lol.
If someone knew that good news or bad the market was going to be moving only one way, they could make some serious money. Right GS?
If indeed it was a single 200k block ( my data is showing ~90k) then something is funky. All these years I've never quite figured out how to buy and sell the same contract, for the same size, for the same price, at the same time. There would have to be two coincidental mistakes here: selling to yourself(somehow) and doing so for 200k SNPs. Who trades $11 bil in nominal value at one go? Even if someone did there would be no size like that out there, you'd have to clean out at least a dozen points in bids/offers. No one would purposely trade more than a few 1000 at one time - maybe in the last 5 minutes you could pull something crazy but not mid-day. So it's not a fat finger, it's fat fingers, maybe a fat hand.
Add another coincidence: it happened as the es broke thru its pre-market and previous day highs, causing everyone to read it as a breakout.
Most of the time when you see big volume at that point in a rally off the morning lows it seems legit as programs and larger positions take over but i don't understand how you mistakenly sell yourself 11 bil $ worth of contracts? I must be missing something
It was 228,000 orders but certainly not one block. That would have cleared the book by about TWENTY handles, taking the market to about 1157.00 in seconds.
It was a series of 1,000 and 2,000 lot orders milisecond after milisecond.
No doubt it was prearranged to send a message: This puppy aint going lower.
That makes more sense. The blog post made it sound like they were single blocks and I'm usually glued to the NQ so I didn't see it fire off on the T&S.
On the 333tic chart I plot volume as average trade size, usually the average trade size is 5 - 10 lots but for the "error" bar it was ~70.
Back when I traded ES exclusively the most I can remember going off is maybe a dozen or so 1k-2k partials (presumably part of one trade) into a heavy close... but those were the days when claims of large scale manipulation made you a kook; now you have to be crazy not to suspect it, especially when it comes right at a technical level that everyone is keying off of.
Mr Durden, nothing is fucked here. Keep it together man. :)
Buying futures mid-day to help the market break through key resistance? Is that the theory? I'm guessing the PPT really did fat finger that one. Trigger happy, don't want to leave a trail, or too lazy to hit the bids? It sounds like someone who flat doesn't give a flying f$ck about getting a better price. There's only one entity with cash to burn like that. Pay no attention to the man behind the curtain.
If the trades exactly offset each other and they had the same counterparty, these are wash trades. There was no cash to lose. It was churn to create the illusion of volume.
playing solitaire and got carried away eh?
Uh, its worse than that guys.
I only have 100,000 contracts on that bar.
So it looks like the same guy was on the buy and sell side...... fat-finger my ass.
That also explains how it didn't totally blow the offer and spike the futures 20+ handles instantly.
When it all comes down, there will be no shorts to provide liquidity at the bottom, wherever that ends up. It will be just margin call after margin call as Fed/GS surrogate hedge funds go bankrupt.
What GS, JPM, MS are doing is peroidically throughout the day buying futures or whatever instrument of choice( it could even be etf's like RTH before the holidays) They save most of their ammo for late in the day. Thats why for the last 10 months you have seen the spikes late in the day. The dealers then give the customer (Fed) the closing price and they the dealers get to keep the spread between the closing price and their average. The crazy part comes if the selling is greater than your ammo, then your average would be higher than the closing price, but with the Fed you never run out of ammo, just print some more. This was a favorite game of the derivative desks in the 90's in individual stocks when they would price the option for a customer. I know, I covered 5 derivative desk from the floor. How the dealers are transacting this with the fed or treasury I leave up to Tyler to figure out.
guys as bearish as i am, go with the trend, the fed is giving everyone free money. I ain't saying go all in, be nimble, but we all know this market is a farce and manipulated, why not make money. We all should know by now as well that there is now way a market crash is going to happen before elections, no way governmnet or FED allows it. Hey, i am bearish, but it is a mistake to short a rigged market. Just go long and make money.
you may want to check in with mr. bond market on that.
oh wow, we lost another one to...the dark side. Good luck man. Are there any other shorts out there besides me? Ya okay, you'll be happy for a day or two. Ya, you'll make some money, for a while. But one day, one day... the market will open gap down, no not just gap down....GAP down. And then you know what it will do? It will GAP down again and then again. And then you know what will happen? The market will close due to extraordinary conditions. Sorry. No trades. Want to exit your long. Sorry. Hold on till we figure out what to do. I wonder what kind of plan they'll come up with to bail out the longs after the market crashes? (Semi-rhetorical question meant for contemplation after you've finished reading this comment.) Then you'll flash back to the good old days, when you were short and miserable cuz the market kept going higher, day after day after day after day. But that won't do you any good today. Cuz today you're wondering what you're going to tell your significant other. You're wondering if your high school best buddy who entered the Walmart management program 20 years ago and is now a regional manager overseeing 25 stores and who you laughed at behind his back cuz you thought he was a loser can give you a job working in the outdoor furniture section. Ya, good luck dude. Enjoy your long while it lasts.
I was pondering this very matter last night. I came to the conclusion that yes, in one sense there seems to be no risk in going long and cashing in, but then the prudent part of my brain kicked in and informed me that every time you think there is a sure thing, be wary, because someone is going to be sitting there looking to take your chips like the rube you are. If the Fed truly is jazzing the markets, then they can easily also do the opposite and you (and I) will be the losers, all according to plan. So it all comes down to what we already know--it's just a casino, and the house is the Fed, and the house always wins, just like in any other casino.
It was bullshit alright...i witnessed it live in my booth at the CBOT. Never seen trades like that before - ever. Compliance came to me to get a copy of my chart.
I'd post it here but don't know how. Anyway, I sent Tyler an email about it all with that chart that shows you the fills inside the bar.
The first massive "mistake" lifted the 37.25 offer 44,800 times. The so-called mistake maker covered bought and sold 15,310 more at 37.50...then another 134,902 at the same price of 1137.50.
Anyway, that sure put in a floor - no doubt.
Gracias senor.
So you are questioning that this series of transactions that required more than one flub could have been an honest mistake? Seriously, the cynicism on this board is legendary. (sarcasm off)
I think you miss the point; it couldn't be a mistake.
It's possible that it was a prearranged "cross trade;" however, the size was so massive even that is a little hard to believe.
@Sarcasto
I was being sarcastic (thus, the "sarcasm off"). I totally agree with you and appreciate your account from the pit.
Completely OT but relevant.
Geithner’s E-Mails, Phone Logs Subpoenaed by House
Jan. 13 (Bloomberg) -- The Federal Reserve Bank of New York was ordered by a House committee to provide Timothy Geithner’s e-mails, phone logs and meeting notes tied to the bailout of American International Group Inc.
The subpoena from House Oversight and Government Reform Committee Chairman Edolphus Towns demands by Jan. 19 all documents related to the New York Fed decision to fully reimburse banks that bought protection from AIG and efforts to persuade AIG to keep information about the payments from the public, Towns said in a statement today.
“We need to understand why and how taxpayer dollars were used to bail out the same people who helped cause the financial crisis in the first place,” Towns said in a statement. Geithner, who was president of the New York Fed when AIG was rescued, is now President Barack Obama’s Treasury secretary.
http://www.bloomberg.com/apps/news?pid=20601087&sid=actzu28yoSNc&pos=3
Dumb question, but where is the line between illegal manipulation and goosing the market in a manner where you expect to provoke a reaction from other traders or their computers. Is this different then "cornering" a market?
Might one expect that the market will adjust and adapt to such tactics or are there just too many simple folks to be fleeced who will eventually flee the market?
Where is the line between illegal manipulation and goosing?
It's called an uptick (goosing), whereas a downtick would be considered illegal manipulation. Up=good. Down=bad.
Can anyone explain how on Black Monday, Oct 1987 in a lock limit down market with a absence of bids, how suddenly e-mini contracts can possibly trade up sparking a 500+ point rally to save the equity markets.
If it worked before, why not do it again?
And people look at me like I am crazy when I mention rigged markets......
CME is "reviewing" this. SEC is "reviewing" this. Congress will "grill" those responsible with "tough questions". Bankers regret their decisions, and apologize for their "risky behavior".
Such is life in fascist America.
I won't hold my breath waiting for any criminal investigations, let alone any indictments. Let's all worry about the fruit-of-the-loom bomber instead.
http://www.opednews.com/articles/1/The-Underwear-Bomber--Cru-by-Joe-Quin...
This is just hilarious. This guy had the balls to trade an extremely large block with himself at a key level to fake a shit load of volume. This obviously unleashes the momentum programs which results in a nice up day for the market.
I think you are onto something - more than most of the conspiracy prone types on this site. This is a legitimate move to trick program momentum types into unleashing a load of volume on correlated indices. Or it stopped other from trading - depending on the algos. And it worked. This guy is probably sleeping on a pile of money with many beautiful women tonight.
Who looks stupid now?
Whoever did this made buku bucks as he sparked a bunch of momentum types to fire and scared away some of the fading types. This guy looks like a genius while the rest of you conspiracy prone types bang away at PPT and other eccentric theories.
Whoever pulled this trade is probably sleeping on top of a pile of money with many beautiful women tonight.
Who looks stupid now?
In Japan in the early 1990's, people used to cross large amounts of futures at the two daily market openings (morning and after the lunch break). The entire system was computerized, so the trades crossed at the open. After a few days the "winning" side of the trade would be booked on the Parent company account, and the "losing" side would be booked in a non consolidated subsidiary. Japanese accounting had a rule where a sub need not be consolidated if it represented less than 10% of revenues, assets or profits. Obviously the system was abused. The funny thing was that it took foreigners to call bullshit. The Japanese are enamored of style over substance, so just accepted it and cheered the "profits".
"according to the CME the two 200,000 ESH0 block trades allegedly offset each other"
Allegedly? WTF? Does it depend upon what the definition of allegedly is? For every long there's a short.....allegedly? Like Lloyd never was offered to settle the CDS at any price other than 100. Lloyd hisself probably wasn't fer sure, allegedly.
Allegedly? Another a-sexual beastie boy in the pits again? Oh, that's why they went electronic. More accurate and less prone to error and manipulation. Gosh, I feel better now Mom.
IMPROVING ORDER EXECUTION
The Ascent of E-mini Equity Index Futures and What It Means for Your Bottom Line
...
Market Impact Costs
Clearly, the ability to transact orders without moving the market is critical. Although a number of different metrics may be used to assess market impact, we considered the difference between the middle of the market at the time of the order’s arrival and the order’s execution price, or the average execution price in the event of fills at different prices. Our rationale is that while many variables can influence an order’s impact on the market, the depth of book, size of the order and the client’s urgency will have a significant effect.
This was traded on the back of an option spread. One of the larger bailed out Primary Dealers put the cross up.
I'm all for conspiracy theories but theres way too much white noise on this blogsite now.
Where are all the market professionals? This place has turned into X-File rejects.
Whoever pulled it off - It was a brilliant trade. Timing and size was huge enough to scare off the shorts for the rest of the day. Has to have been a government dealer - given the size of the trade.
can someone explain to me how they block traded this? According to CME website, mini-spoos are ineligible for block trades.
Sergey?
as i can see open interest was unchanged, so this looks like one huge long handed over the stuff to the other
oh boy! Only conspiracy theories here. Everytime I think I will give this site another chance i keep going out with the same EVRYBODY IS OUT THERE TO GET THE LITTLE GUY feeling. All these commments were made at 700, then 750 then 800 then 850 , 900, 950, 1000...1100..what 1150 now and 1200 1250 soon? The durden guy keeps dramatizing all his posts attacking quants, GS, FED, CNBC, SEC and god knows who else. He is selling adverts and probably making good money but most of you guys posting comments here - im just shocked at so much negativity. The sky is not falling and there was a huge overreaction from 1575 to 667 because people thought sky was falling. With so much negativity how do you guys make money? Everywhere people selling their outrageous predictions....
Let me give mine.....
(1) world as we know will not end
(2) USD still safe haven and US not defaulting
(3) Markets around midpoint of the highs and lows and will find footing when earnings normalize and economy recovers. It always does and always will.
(4) Gold not going parabolic. When all this hoopla sobers away, gold will again become less interesting and will find its own trading range somewhere in the 800-900 range
(5) no hyperinflation - if this govt prevented depression rest assured we will not go to the other extreme also
I see this volume on my 5000 V chart.
38 bars x 5000 = Volume of 190,000
price was all between 1137.25 and 1137.50 whole time.
Obviously these were limit orders.
If they were market orders the price would of flown like a rocket or a stone.
If I made a mistake with a limit order I would simply cancel it. Why place another order and pay all that commision unless you intended the volume to show. And yes this happened exactly as price reached the high of the day.
And then it went 8 full points higher.
Awesome times we live in.
Is this the greenspan put in action?
steve