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The Fed Finger: More Observations On The ESH0 Incident
Fidel Sarcastro submits:
What happened at 12:03pm Eastern Time? There were no reports out, the 10-YR Note auction wasn’t until 12pm, and the S&P500 was a bit stonewalled just under 1137.00 after a rally from the day’s low. As the market advanced slowly through the congestion it hit: a MASSIVE order, or series of orders, lifted the offer in the e-minis. But it wasn’t your garden variety large order of 2,000 mini’s – I’m talking about 114 times that size.
At 11:03am today at the Chicago Board of Trade (12:03pm EST) over a quarter of a million mini-S&P500 orders traded north of 1137.00! (228,000 last count)
I looked at the attached chart in disbelief. Could this be real I wondered? Was it some sort of computer malfunction that added too many zeros to the reported, yet smaller, trades?
No, that’s not what happened. In fact, a bit of a hullabaloo occurred around my trading booth on the floor of the CBOT as many locals, brokers, and compliance members stared at the aforementioned volume chart in disbelief. As it turns out, all of the trades were indeed valid. None were busted. Moreover, as one of the compliance members told me, he saw the trades listed sequentially (1,000 or 2,000 lot orders) and they all occurred with milliseconds of one another until the massive order was completed.
This order size takes a SERIOUS bankroll to get done. If you are wrong by one-point on a 228,000 lot ES order, you can say goodbye to $11,400,000.00. If you contemplate this size your margin requirement is $1,282,500,000.00, while the notional value is $12,961,800,000.00.
Has a new “playha” hit the scene? Is his nickname “Helicopter?” Has high frequency trading (HFT) taken root in the mini-S&P in a huge way?
In the end it may turn out to have been a “cross trade,” where one institutional firm prearranges a large order with another to clear it in an orderly fashion.
As of now I don’t have a firm answer, but whether it was HFT activity, the “Helicopter,” or a massive cross trade, it sure set the bottom in for the afternoon. Everyone in the Dow, Nasdaq, and S&P pits were talking about it and nobody was willing to sell into that massive bid.
Trade well and follow the trend, not the so-called “experts.”
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stop second guessing and trying to fade it. This lasts for atleast two years.
From: Smart Money
sorry guys i admit it ,it was me, i was placed the trade, meant to be 200 contacts, not 200,000. sorry for the trouble i may have caused.
I feel for you, happens to mee all the time
Hey, I can take three or four of those off your hands if you want to diversify your portfolio a little. You take food stamps?
Well when you don't have a PR then a "Fat Finger" will have to do.
It's not like anybody is going to waste any investigative resources on it... not with Mary handling the SEC, besides nobody listens to the blogs anyway....
This has been reported to the Securities and Exchange Commission.
If Wall Street wants us to risk our money, then the game cannot be rigged like this. I think this is shenanigans. I also think it is illegal as hell and somebody needs to go to jail.
There sure seems to be a lot of effort put into having "confidence in the market", well how the hell can we with this level of blatant BS???
There was another "computer malfunction" as well on Sunday, as a reporting agency for Etrade, ScottTrade, and TD Ameritrade all had 5 etfs up 503%. Those ETFs were FAZ, QID, BGZ, ERY, LHB.
My take on this is that if this is not "intentional market manipulation" that there is "nexus" being reached through robo-trading, the market fundamentals, the market fundamentals, and the exuberance of the "up" market, that a perfect storm is now set.
The "Black swan" event is going to be again an "inadvertent" trade. Look at what this one did.
Our market is as John Stewart stated apparently made out of "balsa wood and baby tears", and is that freakin' fragile.
If there is nothing really making the market go up, they it would take a little nothing routed thousands of robo-trades with the HFTers to propagate massive market collapse.
Everything I have been reading here and all the crap doing off in dyslexic divergent and incompatible convergence says this market is so massively unstable that anything will set it off.
I think that is why somebody pulled the trigger on this 228,000 contract trade.
The only current position I have in the stock market is a S&P short and I even feel foolish having that hanging. I need to do a gut check on why I am still calling my investing strategies, 'investing,' instead of fantasy lotto or some similar strategy. Market transparency is zero, fundamental correlations change with the weather, even the obvious manipulations seem to have no consistency. I have to admit I don't trade on the hour, but in reality I don't feel comfortable making trades by the day, week, month, or even year. The stock market has become a charade, a ponzi, a confidence game where even the grifters aren't sure who the marks are. I can't compete with Bernanke, Geithner, HFTs, and when the president of the United States recommends that I buy equities in a national televised speech, I am positive, it is all just one giant shell game. I have come to the conclusion that the most important investment strategy I can employ at this time is to have assets outside the boundaries and reach of the US government. Japan will our Weimar republic event and when their currency goes bust, so will all others with inherent weakness. Hard assets are the only alternative I see, but our country has a history of simply confiscating these during periods of crisis, so my hard assets must be located outside the continental US, and of course they sure won't be located at UBS. Is there any chance the Large Hadron Collider can project a singularity into the center of Washington DC and just suck all the scum into a black hole? Maybe even that wouldn't be enough as the slime covering most of them would probably allow them to slither past the event horizon, unscathed. Our leaders have become untouchable, our economy is a sham, and tensions around the world are beginning to resemble a hornet's nest. Thank god for good Puerto Rican Rum.
re: last sentence. Try Gosling's Black Seal Bermuda rum. In Bermuda they mix it with Coke and call it "Dark 'n Stormy" with good reason.
Not coke. They mix it with ginger beer. Mmmmm, dank and stanky...
Best drink ever. If you like it spicy, go with Goya brand ginger beer.
if by Coke, you mean Ginger Beer, then yes. And given it is 9:45am and the market is moving higher, I just might have one.
I don't believe a cross trade would be handled through the exchange like that. Maybe some deep pockets figured out how to mind-f$ck the HFT computers into hyperventilating?
That would be cool
A friend forwarded this after the close:
So, if these rapid-fire 1000, 2000 lot trades were between the same entity, but at sequentially higher prices, this would indicate blatant market manipulation. At a cost of $11.4 million per point in a worse case scenario, this is peanuts from the helicoper above.
Investigate, identify, and prosecute these criminals!
Thanks for this note. Now this makes more sense. When do the index options expire again? Is it in any way possible that the maximum pain point was above the Wednesday 12 noon ET? ;-)
Why wouldn't two institutional buyers handle this off-market in a dark pool transaction?Wash trades give the appearance of volume, but carry no risk to the manipulator, only that margin be posted. $1.2B would be a large player, but who says the CBOE required that margin? Compliance? Yeah, I'm sure they were all over it. The trades were meant to lift the bid.
$12 billion of equities would be a 6% tactical weight shift in a $200 billion asset allocation program (if I can do basic math right). There are some but not many asset allocation programs with $200 billion notional.
If the offers were being lifted, I guess it's right that this was a buyer initiated move. I am less surprised about some overconfident GTAA manager swinging for the fences; but who the hell had the balls and the capital to sell it to them? That shows some confidence in one's computer trading the index basket! ;-)
Whoever did the trade is up $77,000,000.
There was only one counterparty trading with itself. Come to think of it, that may be the future of the entire market. Just the FRB trading with itself.
To infinity and beyond!
Wohoo, FRB record profits. That is a special 50% tax I could get behind, FED profits.
Yeah, that was me. I screwed up.
Forgot to put in the final zero and hit the submit button to early.
Oh, well... there's always tomorrow, I guess....
"Follow the trend"??
I *SET* the trend, mutha-effa!
You *SET* the trend?
Wow - Nice to meet you Chuck Norris.
Really a historic moment. I don't know why there is not much news about it.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aE.x_r_l9NZE
If you didn't like bush, your going to hate obama. The banks owe obama/Rubin so they are eager and happy to manipulate the market on behalf of the adiministration. And borrowing money at .5%, its extremely profitable to do so. Crime does pay.
Golden Slacks did it to pay for Overlord B's inconvenience having to be in DC all day drinking tap water out of a dirty glass.
+1111...hilarious, Jim.
Sarcastro, thanks for this. All of us stared in disbelief at what we were seeing, and you are definitely right, no one in his right mind would sell into this ridiculousness.
this begs the question: WHERE THE FUCK ARE THE REGULATORS?!?!!
here they are
http://images.allposters.com/images/mmph/222816.jpg
They look more like bond vigilantes...
If a cross trade, like an EFP [exchnage for physicals] in the bulk commodities futures markets, then typically done at largely one price wherein both sides are lifting their respective hedges with each other.
Too little info thus far, awaiting CFTC & Exchange reports, as the SEC is too busy defending themselves ...
The stock equity CMKM/CMKX owner victims/participants recognised that they had been misled and scammed, took legal action, obtained Court approval, and thereby acquired STANDING which has enabled the class action filed in the United States District Court, Central District of California, Case #: CV10-00031-JVS (MLGx), to proceed. The plaintiffs are suing the Securities and Exchange Commission for $3.87 trillion.
Here is an interesting thought. Could this 228,000 es mini cross be related to the 10yr auction? Some type of swap between the Fed and primary dealers? First, the auction and es mini print happen in the same time frame. Second, the indirect bidders only took down 30%, leaving roughly 14 of the 21 billion for the PD's to place. What was the notional value of the print 12 billion? Were you not surprised the PD's found a home for roughly 70% of the auction for long term paper? I wonder if this was a failed auction, and they already knew from indications of interest or lack thereof.
It happened an hour before the auction, but right at important chart resistance, thus a new high.
Sorry.... it was me. My...my... my system said to cover shorts...... and.... and....go long. I did. It was me. Sorry for any trouble. Next time my system gives a signal, I'll post my intentions on ZH before I push the button.
This is extremely dangerous manipulation whether or not the trade is real.
A 13 Billion dollar trade?
Let me repeat:
A 13 Billion dollar trade occurs within mere seconds?
This has RICO all over it. Unless Bill Gates or Warren Buffet decided to "go all in" on risk futures contracts nonetheless within the execution window of mere seconds, This can only be done by the FED and several other conspiring privately controlled central banks with the coordination of thousands of their banker cartel minion through the help of Goldman Sachs like computerized trading can pull off this crazy trade.
Only someone who can print money out of thin air and put it in play will risk this much money within mere seconds on some of the riskiest contracts in the investment world.
Is this why the market did not tank again after Yesterday's Alcoa and Electronic Arts disasters?
Here you had the top 2 corporations in their fields release lousy earnings and make bad forecasts.
The level of manipulation is getting so extreme that there is no way to excuse what they are doing anymore. There is no trust in the market because there is no market.
There is just an infinite balance sheet destroying anything and everything about investing, trading, speculating....
You cannot execute this massive of a trade without multiple banks knowing about it and most likely front running it for their illegal profit, isn't that right Government Sachs?
Or did you take the other side of that trade or make a side bet on options or some other security you had a hand in creating?
http://funy1.blogspot.com/2010/01/look-ma-federal-reserve-returned-45.html
No wonder the Fed is generating such record profits.
A mighty big order for a lousy 0.83% gain in SPX, wouldn't you say? Per the cross trade possibility, then, might someone be building a large short position? Seems in this environment a move like this might be construed much as it apparently was. ("Everyone in the Dow, Nasdaq, and S&P pits were talking about it and nobody was willing to sell into that massive bid.") Perfect if your intention is to be filled "in an orderly fashion."
A single trader cannot execute and hold outright 200,000cts as that surpasses the position limits imposed by the CME.
As another poster said, it was simply a trader who accidentally bought and was offered all at the same time.
Usually ZH is full of insight, but this one is blown out of proportion. If you observed the orderflow occurring immediately after that trade, there were plenty of sell orders that took prices back down about a point.
Where is the SEC? Well they are busy investigating BOA but not going to indict anybody. They will get to this and discover it was nothing of substance. They always go for the big fish like Martha Stewart. Remember, they nailed her. Good job.
.
Get OUT of the paper casino boyz!
Where there's smoke -there's fire. It's really that simple...
...we all KNOW it's a ponziified house of cards. Right?
http://www.youtube.com/watch?v=FIWb8HJ5gLo
May we survive via true grit, the Judicial branch, and the military. There are still good patriots amongst their majority. The banksters are simply outnumbered by the armed populace. Freedom will reign on this land -however ugly.
Starve the beast. Get your "money" out. Stay out of debt.
Barter. Trade. Day Trade? Not for long.
Time to live on what you EARN Amorica!
.
Day in and day out, we see shit like this. Yet Barry Ritholz says that the idea that the Fed buys stocks is nonsense. What a dumb-ass. He can't be that stupid. Maybe they're paying that mother-fucker to say that.
FreddieinBangkok, How dare you put down the legendary Charles Biderman. Go back to hacking Google for the Chinese, you stupid son of a bitch. Leave stock market analysis to your superiors, you stupid fucker.
If "Helicopter" would like to manipulate the market or be a big time playa... don't you think that he and his posse would do it in a more subtle and sophisticated manner?
Arrogance has some interesting side effects, particularly when there exists virtually no check and balance.
Yeah, like the health care bill going through Congress(D) right now.
Ishtar's' saddle is empty, cause she's prostrated under the beast. http://images.warnewsradio.org/lionofbabylon.jpg
Hmmm, interesting counterweight http://www.livius.org/w/weights/weights.html
http://www.livius.org/a/1/mesopotamia/nimrod_3mina_bm.jpg
http://www.scales-and-weights.com/scales/scaleidx.htm
http://www.archive.org/stream/weightsbalances00weig/weightsbalances00wei...
Interesting, how Babylon is fallen twice, when you consider the cup of fornication held; the number of the beast, devouring tax and inflation represented by the weight of the Lion of Babylon. It's especially interesting, now that the prophetic City of Babylon is risen. It's more than interesting if you consider the 666 gold standard, of King Solomon, that prospered, when you compare G$ etc.. and the two examples of the inversion offered in the claim of dominion, expressed by the fact that Babylon is fallen, is fallen and all having accept the mark of the beast are sealed before the fall.
That whole ''you shall have just weights ad measure''
http://bible.cc/deuteronomy/25-15.htm seemed to escape the heartless fools on the Hill offering the claim of dominion, the claim without cause for foundation and the call of any return(s) for labor.
By all means, if you are to enter there, into the black hole, do it quickly, for you shall perish and the end of this prison term shall come, with The Correction. http://bible.cc/exodus/21-6.htm
Don't like this...where is the depth for the this market?
Provided by one or two mysterious entities and hedgies and HFT where the prime skillset has become herding the
the decreasing numbers of those that still show up to trade?
Looking at that ESH0 trade yesterday, with the benefit of this morning's jobless claims, and retail sales numbers leads me to the conclusion that if indeed it was the HELEICOPTER who was responsible for the trade he was no doubt front running this mornings numbers with full knowledge that the news was negative. He was attempting to put a floor under the market at 1137. Right now 1137 is being challenged. Will it hold? We shall see.
I still favor the view that, with a little incentive, algos sparked, took over, scalped, repeated.
We watch this during the upward bias.
When the downward bias ensues, the viewing will be that of epic proportions.
Oh, I almost forgot...when the downward bias ensues, THAT'S when we'll see intervention from the SEC, et.al.
My bad, the trade was mine. It was a mistake though. I meant to buy 1 contract and accidentally bought 223,000. What's the big deal? I'll just dump 'em today. 8-)
Forcast 2020-Top Officials in the Federal Reserve Criminally Investigated
- A silent change that started after the financial collapse of 2008 gained momentum with the bill to audit the Fed. After the bill was approved everyone could know who got all the money that Ben Bernanke printed during the great panic days of 2008. The public was outraged and demanded an investigation of the Federal Reserve activist throughout the last 100 years. A special investigation was held and millions of pages where opened to public's eye reveling very close ties between the Federal Reserve and the financial elite of the United Stated dating back to 1913. A special committee of subprime court judges announces that part of the activities held by top fed officially where " criminal by no doubt"
http://israelfinancialexpert.blogspot.com/search/label/predictions%202010
It is moments before the open. I have asked around the floor for an answer & there isn't one. Everyone is in the dark.
On to the open.
OK, spoke to someone on the board of the CME and he says it was an error - period. As in "move along - no more questions please."
Odd thing though - whenever I make an error I seem to be underwater instantly. How did a 228,000 lot order not MOVE the market? How did they cover it so fast? Come on.
Just China finally learning, that the real currency in the US is stocks, not dollars.
We will never again see sub-1000 SPX, with the chinese red wall of bid always beneath this market.
It seems like all the trades occured at 12:03:37 in the span of 1 second.
So, this tells us a lot, because it's not the case where a trader started an algo, and then realized somethign was wrong and stopped it. It happened literally in the blink of an eye.
1 second isn't enough time for someone to react that quickly. This leads me to believe that whatever the intent of the algo was, it finished to completion.
The other thing to consider is that this didn't move the markets at all, maybe 1 tick. Since this streamed onto the markets, it should have cleared out all existing trades at those levels, but that's not what you see, even amongst these trades of 200-2000 contracts you can still see small trades of 1-2 contracts in that second. Each bid this algo sent out was matched for each ask and vice versa, which is the only way that it wouldn't move the markets.
What kind of algo is set up to do something like that? What sort of algo is set up to exactly match bids and act like a big vacuum cleaner like that?
I'm of half a mind to put on my conspiracy nerd hat and suggest that it could have been an inadvertent test of a PPT-like algo that ensures an orderly matching of all bids coming in, to stop the markets from plummeting too quickly.
I'm not a super-conspiracy nerd but it's simply wrong that the markets didn't move with that level of volume. Someone showed their hand yesterday, I'm curious to know who that was.
GOOO!!! GET TO THE CHOPPER!!!!
"inadvertently traded
approximately 220,000 contracts as both buyer and seller"
Some computer programmer just got his "twinkie" bonus for the year ...
Hey boss, let's blast 220,000 bogus transactions through the casino, and see what coins fall out the bottom!!
You get to phuck with every running computer model!
Next time it will be 500,000.
The crucial question is who is the gamer?!
1/14/10
8:25EST
In short we developed a new pattern yesterday
C/T (Irregular)
Neutral
Equalizer: 1137.25
Up Price Target: 1161.25
Down Price Target: 1113.25
Irregular C/T’s majority of the times are reversal patterns
Soon I’ll give the failure/success ratio statistics on this pattern
Immediate term : 60 to 120 minutes
I’m expecting a move up to 1145.75.
1146.00 is a key level in order to determine if we continue up
The overnight session FR (Federal Reserve was not in the market)
Yesterday they were 14% of the total volume (ES only)
Since the GM bankruptcy and an incredible rally upon the news, I’ve been tracking all the volume on the S.P. Minis; attempting to formulate a conclusion regarding Federal Reserve intervention in the marketplace. In addition I’m currently trying to get a major reputable newspaper to write an article with my volume data (without a address, electronic trading)
In my estimate the Federal Reserve currently are long 1,231,295 contracts on the March contract, their average price is 1104.00.
Their margin is hard to say, everyone pays a different price.
Their profit margin is $50.00 per point per contract
Which is roughly $2,000 per contract.
The demise or downfall of this market will be the reckless tenor of the Federal Reserve trading the marketplace. They are not traders. When push comes to shove they will fuck-up up big time, which in turn crashes the market.
This reckless policy jeopardizes the entire financial foundation of the U.S. Government and the U.S. and World Economy.
This is extremely dangerous.
Nice Work Che!! I agree completly
umm how do you figure?
Was once "bangin' the close" ...
Now "bangin' a noon'r" ...
So where would the market have gone if there hadn't been a buyer waiting to handle the block? If you intent is to move the market you could do it with a lot less trading capital. Which points out an inconsistency with trading floors, that is you are big enough to find a buyer for your block, you can do it near or at the market, if you are half big enough you take a beating either buying or selling into the average volume flow. And of course if you're super big like Goldman, maybe the order never passes on the ticker. Inclination is to believe this is a small order, or one of the big boys couldn't find someone to pick up the phone at the other end, AND maybe somebody is in trouble.
Hmmm, I have heard from two different sources now that 4 banks were involved in this. It just gets weirder by the moment.
Boy, wish one of you guys would use some brain cycles to correlate the dip in dollar valuation which occurred during this time frame. Starting about 6am, and ending right about when this "spike" was happening.
http://quotes.ino.com/chart/?s=NYBOT_DX&v=i
Wig boy Geithner was blowing Hele-Ben when Ben said, "hey, Hair, want to see something pretty cool?" Just at the time he pulled the trigger on the trade, he spunked the wig's face greasy!