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This Has To Be A Joke: SEC About To Blame Entire Flash Crash On Waddell And Reed's E-Mini Trades
Bloomberg has just released something which if true, will wipe out every last ounce of credibility left in the market. As readers will recall, the initial scapegoat that CNBC and everyone else, who has no clue what really happens in the market decided to pin the flash crash on, was small Kansas-based trading firm Waddell & Reed, which traded a few extra contracts of E-Mini futures in the hours preceding the flash crash. Well, ladies and gentlemen, if this advance glance into what the SEC is about to disclose in its flash crash report is indeed valid, then the entire flash crash is about to be blamed on Waddell and Reed once again, with no mention of High Frequency Trading, or any of the other real culprits for the drop which wiped out $1 trillion in market cap, and the furthermore the report will have no policy recommendations. This is so insulting to the general intelligence of the average American investor who has by now seen the destructive influence of HFT in action so many times, that it will wipe out the last remaining shards of credibility left in US stocks. Will Mary Schapiro next blame every single mini flash crash which we have seen on almost daily basis over the past month on Waddell and Reed as well? Or is that reserved for E-Trade retail accounts? We will not pass judgment until we see the final report, but if true, this is immediate grounds for termination of the SEC head, and will require that everyone pull their money from the market asap, as it will definitely confirm that even our regulators have no clue just how broken the market truly is. It will also confirm that every single SEC staffer has been bribed, bought and corrupted beyond repair by the HFT lobby.
From Bloomberg:
U.S. regulators have concluded that Waddell & Reed Financial Inc.’s trading of Standard & Poor’s 500 Index futures spooked traders on May 6, turning an orderly selloff into a crash that erased $862 billion from the value of American equities in less than 20 minutes, according to two people with direct knowledge of the findings.
Waddell & Reed’s selling of the E-mini futures was part of a normal hedging strategy, according to a report from the Securities and Exchange Commission and Commodity Futures Trading Commission that may be released as soon as today, said the people, who declined to be identified before the findings are made public. The Overland Park, Kansas-based company didn’t attempt to do anything nefarious, and its actions may not have prompted a retreat had there not been other concerns in the market, such as the European debt crisis, the people said.
Waddell & Reed will not be identified by name in the report, the people said. The document won’t make any policy recommendations, they said.
“I’m not sure it’s appropriate to comment on a report that doesn’t name us specifically, but it’s clear we were one of many traders that day,” said Roger Hoadley, director of communications at Waddell & Reed. “We were merely trying to manage downside risk in our portfolios.”
SEC spokesman John Nester declined to comment.
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http://en.wikipedia.org/wiki/Being_There
Anyone watch the Senate Finance Committee hearings today with heads of Government Regulatory Departments reading scripts at third grade level?
Hukd on foniks wurkd reel gud for mee!
Sickening.
waddell and reed, eh?
i thought they had ample video evidence already against some woman named debbie in dallas?
yeah, weren't they just the two old gents selling wine coolers from the front porch?
"Thank you for your support." -- Bartles (or was that James?)
You were right earlier, Tyler...
Fuck it.
Wow!
If Waddell & Reed wield that much power where can I apply for a job?!
The new GZZ
http://stockcharts.com/charts/gallery.html?s=gs
Not only that, but... I didn't know that algos could be spooked.
http://www.waddell.com/
Their site is still up, for now.....but soon to be shut down for SEC investigation.
Wonder which small advisory firm they will throw under the bus after the next flash crash.
We need braver robots, like Bender Bending Rodriguez!
Recruit from the "Robot Fighting League."
It was the Dukes! It was the Dukes!
someone owes a dollar to waddell and reed for winning the bet to crash the market.
Straw Man' Bitchez
The origins of the term are unclear; given is that it originated with men who stood outside courthouses with a straw in their shoe in order to indicate their willingness to be a false witness.
And once again the dofuses in charge miss the unintended consequences.
If it was so easy to start a flash crash (one firm placing a middle-sized order) doesn't that mean it could happen again at any time?
It would be a better cover story to suggest it was a strange confluence of a vast array of circumstances that would be virtually impossible to replicate. Hell, blame it on those aliens anticipated by the UN or that messed with the nukes. A futures order placed to hedge exposure? Any day now...
Insulting to those who don't buy it. Condemning to those who do anyhow. Either way, another nail in the coffin has been pounded into place.
The question is, who's coffin? The SEC is going to look incredibly silly (or sillier) going forward, as it becomes increasingly obvious that they either don't know what's going on, or are deliberately choosing to ignore the problem.
This is basically an infowar problem. You've got lots of people, driven by lots and lots of money, trying to hack the system, with the potential reward of some really big bucks. The flash crashes are simply the first by-product of this effort, and the way these things work is that you can expect it to escalate. I wouldn't be surprised to see it move up so that the bot creators start trying to hack the other bot creators.
The end result of this will be (as these things always are) an unexpected outcome. Someone trying to outsmart someone else, with unintended consequencies. There's a good chance that the next big crash won't be a flash one, but triggered by such.
By the time this happens, the SEC will be left wondering what the heck just happened, and looking even more silly.
As for who's coffin, I suspect all of us will be jumping in.
Everybody KNOWS it was Libyan Hackers with their '286 Turbo PCs! :>D
Insulting our intelligence? The Government? Naaaah! Where the hell is my HOPEum pipe?
I prefer Hopium blunts.
Good to know that in addition to having best politicians money can buy, we also add to the list regulators too.
Smoke them green shoots, bitchez...
Makes Obummer-nomics "No Bankster Left Behind" (NBLB) more palatable...
This news leaks nearly 5 months after the Flash fact and at the 3rd quarter time out so as not to disrupt the magical "Recovery September" upflow. All a coincidence, of course.
Or maybe waterboarding the W&R crew to take the fall took longer than projected.
Scapegoat, what!
If true, then these are the last desperate throws of a corrupt and bankrupt system.
LOL
I suspect there are plenty of desperate throws, grabs, lurches and projectile vomiting left in this corrupt and bankrupt system.
Take a stroll down American economic history if you wish to see what's coming round the corner. We ain't seen nothing yet. We're just beginning to separate the liars from the pathological liars from the sociopaths from the criminally insane from the hidden hands.
I would say we're only now turning the page to the middle of the novel where things begin to get hot and heavy. We've got a long way to go before revolution. See, it isn't about whether you and I are ready. The question is this, is the butcher, the baker and the candle stick maker ready? Or to update this a little, is the school teacher, the nurse and the office worker ready yet?
I think not. They still have plenty of false hope and denial to burn through. As long as they'll listen to the "Change you can believe in" meme, or whatever both parties come out with in 2012, nothings going to happen. It's only when they no longer believe in hope and change, only then will they pick up a rock and a stick and beat a new system out of the old one.
We're just beginning to separate the liars from the pathological liars from the sociopaths from the criminally insane from the hidden hands.
CD - Is that even possible in a realistic world? Great description.
OK, so this might not be the cause of the Flash Crash as we know. But on a stranger sidenote-
If the SEC report does not name the party (assuming it 'is' W&R), how certain are people that W&R are the ONLY ones to have traded E-minis this way? That is how can ZH and Bloomberg nail W&R as the single entity?
Say for instance W&R had prior suspicions of a market top as they might be screen whores keenly interested in flagging trends in realtime, so went into May with a short bias. Even if it was a covering short trade while long from the previous rally. End of April was enough of a signal to sensibly short equity indexes.
When things went bad quickly theirs wouldn't be the only eyes glued to an attractive short. But why are they the 'only' ones singled out? I don't get this bit - what was so particular about W&R that stands out on it's own? They were on the ball from what I can see.
"But why are they the 'only' ones singled out?"
"Oh my gosh Toto, I don't think we're in Kansas anymore!"
I'm a teacher. I'm ready.
+1 - Very good reply C.D.
They have yet to struggle with the possibility that their retirement entitlement may not be there when they retire. Nobody cares but for themselves anymore, so it will only happen when the majority are on the down & out. So many will have gone before them, but it is planned not to happen all at once.
It's funny. There's this feeling in the air that has gotten a lot stronger over the last few days. It's like that feeling when you had a few too many, and you head to the bathroom, and you know you are about to throw up, but you don't want to. You really don't want to.
Once it starts, there won't be any stopping it. It'll just keep coming out, until it's all there in the toilet bowl that used to be the American economy.
That is an apt analogy. I usually puke after looking at my portfolio on POMO mornings. Really. It's a new eating disorder, Front-Running with the Fed.
what is keeping me so sveldt. Gotta keep that Rusty away. - Ned
Ya know what.....If the SEC blames them for wiping out $850 billion in equity in a matter of hours..... Where will the fines be?? What about some prosecutions??? I know it was not their fault...but if the SEC is going to lay the blame at their feet...they better do something.... Othwise they are just showing they truly are impotent...
The SEC = EUNUCH
porn addicted eunuch. Kind of somes up the vigor and vitality of our system
spineless eunich geldings
"The SEC = EUNUCH"
Classic!
Best of the week. Nobody is topping that one by Friday closing, curby...
Hey, SEC enforcers, look over there while we put som money in your back pocket.
When does the SEC ever go after the big guys? They left Bernie Madoff alone but caught Tyler. And guess what we're better off for it. Bernie got his in the end (pun intended) and so will the others.
You can't make policy recommendations based on complete and utter bullshit. That's why there's none to be had.
We might as well go back to a 19th century style trading system. It would be onerous bringing bushels of wheat to market, but at least the HFT Matrix wouldn't be fucking over your trades.
and the little guy could make some bread
Well you know it's gonna get stranger, so let's get on with the show.
:)
duplicate
It's never gotten strange enough for me.
"The bigger the lie, the more likely it is to be believed".
This is Propoganda 101, boys and girls.
Hush now. Shhhhh. The sheeple are sleeping.
Hey, Mary, check out this new tranny material I found.
Does anyone have some SEC email addresses we can send porn to?
http://www.sec.gov
Knock youself out
Contacting the SEC was perhaps the biggest waste of my time two years ago. They could not catch Madoff even with all the evidence right in front of their eyes.
Fraud is legal now within the USA, invest and make trades (if you are fool enough to still be is the market) accordingly.
BOO!
As per Tyler's prediction, I for one, can't wait to see the E-Trade baby wearing prison garb. He's even old enough to do the perp-walk now!
Thanks man. That is funny. While those commercials are a bit annoying at times they are clever.
On another note...
Per Nic Lenoir's post of yesterday, "After observing the price action a bit more and reflecting on the patterns, I have come to the conclusion that the market will top between 1,155 and 1,164."
Todays high was 1,157.16.
Personally, I believe one more up day tomorrow (only because it's the first of the month and the first day of the new quarter). After that, I think it's going to get very interesting, with or without Brian Sack.
Yep. Next week, it begins.
There's still another month until mid-terms, so I'm betting they can keep it "within the trading range" until then. One big day down, ten little days up, repeat until voters go home.
Dear TPTB: My birthday's coming up on the 7th, please hold off the Great Implosion until the 10th, Thanx in advance -- Jim
Brian "Wet" Sack.
SPY has come all that back to the 75% fib level... well.. it missed it by .02 before it rolled over. I'm thinking that's all she wrote.
truther, birther, tea-bagger
now, we welcome the flasher
Can we honestly be surprised by this?
From the same folks that have missed ever major issue, even having people foreward them and detail about Madoff, JPM silver, etc... the list goes on and on.
Guess this report won't cure herpes or bring back Elvis, eh Tyler.
But at least they have a very very deep understanding of the situation, yeah so does Mike Tyson.
Not surprised... but still disappointed.
What's sad is that the SEC appears to have investigated without context.
Could they have investigated some of the more recent mini-crashes and looked into the commonalities... and come up with some logical conclusions? Or was Waddell- & Reed responsbile for those as well.
The net effect of all this is that the underlying market structure continues to weaken-- precisely because our regulators choose to see no problem.
When the next flash crash reappears-- and it will-- what happens when 100 names in the S&P 500 are affected? What about all 30 DJIA names?
This is what the SEC is implicitly endorsing.
Completely agree.
It not like there is much confidence there anymore. How many billions in outflows in the last 21 weeks, how many daily flashes have we seen, the level of disfunction is just mind blowing.
The only difference between now and say 10 years ago, is that they are just not being shy about robbing everyone blind. It just appears to be a final mad dash to grab as much as they can before the whole thing comes unglued.
exactly, they see no problem because they are the problem
Can't find what you don't look for.
consider the source, what do you expect?
Can we honestly be surprised by this?
From the same folks that have missed ever major issue, even having people foreward them and detail about Madoff, JPM silver, etc... the list goes on and on.
Guess this report won't cure herpes or bring back Elvis, eh Tyler.
But at least they have a very very deep understanding of the situation, yeah so does Mike Tyson.
Kafkaesque.
~Misstrial
Wadell-Reed (during the perp walk in front of the cameras): "They're taking me in because of the fact I traded stocks away from their wall street. I'm just a patsy!"
Classic patsy.
Gotta feel sorry for Lee Harvey O.
Careful...the overly wealthy here in Houston are telling me to "be careful shorting" AND every broker here at the bar is pumping their clients with CNBC stats about how a historically great September will be followed by an up October being xxx % good PLUS election stats...Plus Presidential 3rd term stats...havent seen brokers showing their face here for 18 months...until now.
Epic fall coming soon.
that's damn good intel rob...gracias.
Wait. Additional evidence has just been arrived at the SEC. Waddell And Reed were both out sick that day and the trading desk was rumored to be under the supervision of one Tyler Durdan. SEC will proceed against said person with all their investigative weaponry and as of the present the SEC is attempting to locate a local telephone directory.
They also named Morpheus as a "Person of Interest" -- keep us posted.
Of course it's true, this from the same govt that told us that 9/11 was orchestrated and pulled off by 19 cave-dwellers armed with box-cutters!
Power IS a criminal conspiracy. We've built up massive systems predicated on nothing but lies, in which case we cannot admit that it's all a lie else we'd experience a big Wile-E-Coyote event! Speaking of: http://www.youtube.com/watch?v=HR1-aVQn9os
The best part is that Waddell and Reed gave the order to Barclays to execute, so they didnt even hit the button. Unbelievable. And I bet there isnt a single SEC employee that would recognize the difference.
Yes, according to news sources Barclays fucked up, by dumping the whole large order in the (already falling) market at once rather than breaking it into smaller blocks.
There's a notion that one cannot undo technological innovation, and while that may certainly be true, we don't have to be slavishly slobbering over unthinking programs that, for all their efficacy, create a situation where actual rules and regulations need not apply to a market where people's fortunes are at stake. When the day of reckoning comes, who's first against the wall, then? The 'regulators?' The schmucks who are pumping HFT to all and sundry? So much blood to shed, and yet so few bullets to spare.
Just bad news day overall - First the FED res making public it sells interest rate decisions prior to public disclosure and now once again a regulatory agency fails to do it's job .What is next ?(I am expecting the Fed will admit there is no longer any gold in fort knox )
Those tungsten bars are plated with something!!
Little guy will always take the blame (and the subsequent ass pounding)
Here is an idea....defund the SEC.
If the mandate of the agency is to protect investors and maintain the integrity of the markets and it can do neither, eliminate the agency.
Wouldn't investors be better if they didn't rely on the agency? Wouldn't the markets be better if *gasp* traders and their firms had to eat their HFT errors?
At minimum this would allow the HFT's to cannibalize the market and each other in a more timely fashion.
Fuck it and defund it.
Here is an idea....nuke the SEC from space, it's the only way to be sure.
Game over man! Game over!
http://www.youtube.com/watch?v=dsx2vdn7gpY
I am waiting for the alien to come ripping out of Ben's chest and declare: "we are back on the gold standard Earthlings, death to the fiat squad!"
All taxation is theft. "De-fund" everything. Stop using fiat money. Get organized with your like-minded neighbors. Purchase your adjudication and security services from entities constrained by a free market (not the monopoly system commonly called the State"). Free market justice worked at least 1,000 years in Ireland.
Bullshit & End of Empire
BIG MIDDLE FOAM FINGER TO ALL WHO RUN THIS F'D UP COUNTRY!
MY GOD THERE IS NOTHING LEFT IS THERE?
IF YOU'RE NOT STEALING, YOU'RE NOT TRYING!
THE PEOPLE WHO SHOULD BE PISSED ARE THE CRIMINALS ALREADY IN THE JAR... THEY WERE JUST TOO STUPID TO REALIZE THAT BEING A WHITE-COLLAR CRIMINAL IS THE TYPE THAT REALLY PAYS OFF AND ONE WHERE YOU HAVE ZERO RISK.
THIS JUST SUCKS!!!!!!!
HPQ flash crashing now down almost - 5% just in after hours WOW!
It wasn't Waddell & Reed. No. I hate to say this, but it was actually my cousin. See he wanted to sell 10 shares of AAPL and he accidentally sold 11 shares. That caused the flash crash. He's promised not to dabble in large blocks of shares again, so we should be safe.
Well, as long as he promised not to do it again, that's good enough for me. Now, if he'll just divest himself of the "profits" we can move on. :>)
It's not that government has lacked information needed to fix the problem. It is institutionally incapable of bringing about the desired result, since the principles of profit and loss, private property and contract, enterprise and entrepreneurship, do not exist in government. Any Government operates with an eye to its own short-term survival, and those of its connected interest groups, and nothing else. Mises
The twig they threw into the fire today is just the next step of there Masters.
There are still two related categories of Genuine Globalists: Internationalists, whose ranks are filled with "political bureaucrats" whose activities include "forging legal agreements and pacts between nations and, increasingly, between blocs of nations" and Transnationalists, "money men and company men who operate at a certain rarefied level" Genuine globalists, unlike Provincial and Piggyback globalists, have their own institutions to advance their agenda: financial institutions like the International Monetary Fund (IMF), trade agreements like the General Agreement on Tariffs and Trades (GATT), and international political organizations like the United Nations. The power of these genuine Western globalists is not to be gainsaid; Bill Moyers’s finding also that "just about a dozen or fifteen individuals made day-by-day decisions that regulated the flow of capital and goods throughout the entire world" The globalist tripod of trade, finance, and security is largely due to its dependence on the hegemony of the United States. I have not retired yet and Congress is http://www.opensecrets.org/ Wake up since the hour is late Free Men. The true genius of Marxism was its thoroughgoing materialism, and that therefore the true enemy of Marxism was not any particular social class, but the Christian culture that united manager and worker in one civilization. Gramsci’s subtle strategy, therefore, was not to foment proletarian revolutions, which are unlikely to appear, but to "Marxize the inner man" The shadow army grows another member today. In the long run there is no unpopular Government. Going Dark since the seal is in the forehead.
"It is institutionally incapable of bringing about the desired result, since the principles of profit and loss, private property and contract, enterprise and entrepreneurship, do not exist in government."
Uh, that's what government is FOR! It exists to to enable the "free markets" (read "selective corporate backers") to amass wealth.
But... "private property," "profit and loss" etc etc are going to die with the end of growth. Go ahead, kill govt (and get rid of taxes etc.), it'll still all hit the wall.
The SEC stands for Scandalously Egregious Cads or perhaps Seriously Evil &%*s!
I feel like we are in the movie THEY and only we have the righteous sunglasses that allow us to see the truth here at ZH.
Lets be honest...we all knew a scapegoat Would be conjured up an we all know that the PDS and thr FED caused the record drop in 15 minutes at the same moment the Full Fed Audit an Bank breakup amendments were on the table for Finreg.
We can always set out watch to the corruptness. I also want to share a very heartlifting story with everyone who believes the general public walks on an opaque mist fog of distraction.
I credit my father with all the real world education I possess and if it were not for him I have no idea where my thirst for knowledge would have come from but even he for the past year had no conception as to how illusory our world is and that frightened me to death because this is the smartest man I have ever met with deductive abilities and reason that to this day make me feel stupid. This is a man who works on a daily basis with Tishman, Reknowned architectual firm Polshek and is good friend with Sandy Weills son in law and last week he finally got it.
We were at the bar (meet up once a month to chat) and he said to me " I just watched Capitalism: A Love Story. I cannot stand Micheal Moore but I finally realized we do not have a choice whatsoever and every convenient event over the past 30 years finally made sense"
And I said Dad I will never in my life ever get to say this to you again likely an it is the first time I have ever felt confident in saying this but " the shear breadth of the shit I know and have learned in the past 2 years would make your head explode and I would need about 6 hours to explain to you how we live in the matrix but created by elites and not machines"
It was one of my favorite memories and now I send him daily links to this website, drudge and I ordered him 4 infowars films because he loves to make copies and hand out to all his union friends from the Iron workers, plumbers to the stage hands. The people are sentient.
"They Live".
Don't forget the world's longest fight scene :)
Two mad stories in a day regarding bit players being blamed for market manipulation/flash crashes is just a joke too far - I'm goin' dahn the pub.
http://www.zerohedge.com/article/guest-post-defense-robot
obvious witewash is obvious
Assuming this is all true is even more outrageous ...
The SEC blames the flash crash on Waddell And Reed's E-Mini trades - let's assume this is true, that W&R did really cause it.
A smaller firm sells E-mini futures as part of a normal hedging strategy which, in part, causes $862 billion from the value of American equities to vanish, yet, there is no policy recommendation.
Anyone see a FCKING PROBLEM WITH THIS? (again, assuming this is the true cause, which is dubious).
Apparently even the "Junior Apprentice" members of Wall Street get a free pass at destroying the global economy (going with your hypothetical).
Waddell and Reed Brought Down the House??
Project Mayhem should be so good...
is there any part of the government or big business which isn't corrupt? did aliens organize universal corruption to devastate our planet?
If the government came out with the real reason it would be pointing to itself or a terrorist organization.
My shoe shine boy bought 10 shares of SDS that day... I blame him...
I didn't know you could shine fuzzy slippers
Some1 please correct me if i am wrong.
I understand that small traders or etrade account holders can be stupid or uneducated, but the financial institutions with all those MBA's PHD's... do they really buy all this bullshit too, or they just go with the flow?
I am kind of confused. Even if CNBC will be cheering tomorrow and sale bs to masses, do they buy this bs internally or it's just for general public who has no interest in financials fields anyway?
....heck, the biggest fraud of all is suspension of mark-to-market forever and it generally gets ignored ( so long as it is allowed to go on ). The cheerleaders will salute the SEC's vigilance in hunting down the perp.....and the caravan moves on.
OT, My personal economics story of the week:
On business I happened to pass through the Department of Economics and Finance at Stephen F Austin University. A professor of economics and a professor of finance stopped to ask some questions about what I was doing there, and then I took the opportunity to ask them a few questions. I wanted to have some fun, bust their balls, and perform a little psyops.
"I've heard up to 90% of PhD economists are in some way on the Federal Reserve's payroll. Is that true?"
"HAHAHA", he laughs. "No, no. I've taught at 3 universities and no one has been. You have to be a real hotshot in your field, and then maybe you'll get a 1 year appointment at one of the Fed banks."
"Ok. What do you think of the price of gold?"
"What? oh", he looks at the television with CNBC on and sees it's up to $1312. "Hey look it's up a couple bucks today. Well, gold is a commodity. It follow supply and demand."
"Well most of the demand right now is investment demand because of fear of the dollar," I said.
"But gold was delinked from the dollar a long time ago. In the 70's I think."
"It's a competing currency to the dollar."
"I think the system has permanently changed. I don't think we're ever going back to a hard currency if that's what your getting at."
"But why would people want dollars if we are going to monetize the debt?" I ask.
"We aren't monetizing 100% of the debt."
"We monetized 100% of the budget deficit last year."
"Well that's true", both profs say.
"The dollar is priced based on the supply and demand of those goods priced in dollars that people want. That's what sets the value."
"But doesn't the Federal Reserve's balance sheet have something to do with the value of the dollar? They've been printing money and trading it for trash for the last 3 years" I say.
At that point the finance prof who's been quiet for a while chimes in. "I think we need to abolish the Federal Reserve and put in its place a box, a computer that automatically grows the money supply at 3-4% a year."
At that point the conversation veered into Obamacare and the huge debt and everyone started nodding in agreement on one thing.
"A lot of the problems today are pretty intractable" the finance guy says.
The end.
"a computer that automatically grows the money supply at 3-4% a year"
Friedman advocated this exact same thing, we all know how computers and algos work when the economy is involved - JAWSOME! (google image search jawsome, you will be rewarded).
Nice work! No PhD necessary to debunk these fools.
The answer is more formal education and study loans. Now what is your question?
Shhhhh.... Don't tell anyone about this. I could use a few million and I think you could too... mum's the word.
this just in, zerohedge to be blamed for global warming/ murder of santa clause. shame shame shame on u Tyler!
This is the line that disturbs me: "The document won’t make any policy recommendations, they said."
My understanding is that Waddell & Reed's big E-Mini sell order really was a big part of the story. It came when the market was already down about 4% on the day, and was executed by Morgan Stanley in the Chicago pit, as recorded in that audio file that was posted here on ZH. Meanwhile the HFTs sniffed out the order and executed various front-running and related interference strategies, including the real culprit, the NYSE quote-stuffing documented by Nanex. And MS just kept selling into it all the way down.
None of this is to say Waddell & Reed was to blame for the flash crash. They look more like the country bumpkins who put way too much order in MS's hands and got royally reamed.
Yup, same SEC head that cast the deciding vote on a "charge" against Goldman Sachs, a "charge" which the Inspector General of the SEC determined was politically motivated.
OK let's assume that Waddel and Tweed,Reed or whatever fund was selling these. Their sales were said to have "SPOOKED" the market. So, what happens when the big banks start to dump-maybe because of regulation threats, profittaking...whatever. Then,like before, everyone dumps or turns the HFT bots off.
There it goes-proof that there is no interest in the stock market-it's a big void with bits flowing back and forth collecting .5 cents a share.
I guess we should stop worrying about the stock market-it's in a coma and 100% DEAD.
What's more interesting is:
So, how did the market MELTUP again? Where's that $%^&* inquiry?
It was the janitor at Waddell & Reed, who while mopping knocked over a lamp sitting next to a keyboard on a computer open to a trading screen set up to trade only 6 shares, changed that to a very large random number and then rolled over the "enter" key thus executing the trade.
The ultimate fat-finger. Really, a fat-mop-handle or something. We'll get to the bottom of it when we can nab the janitor, who unfortunately fled back to Mexico and is now believed to be mopping at the Mexican Central Bank where he may have accidentally bought $600M in dollar options today. Very suspicious character.
OK, so when are we going to get really honest and admit at the most basic level this is the collapse of Democracy. A successful democracy takes strong checks and balances and well informed, well functioning voting citizens. All gone.
All the problems we have are not the politicians fault or the corporations fault or the governments fault. They are the fault of the absent citizens who have abstained from their duties as citizens. No concerted demands for justice or willingness to educate ourselves and ween us off BS of far right / far left and BS of MSM. System is only about shifting the burden to somebody else, anybody else. Classic systemic failure while everybody looks blame foreigners, corportations, politicians...anybody but ourselves. As CEO of Netflix said, we (except most weirdos on ZH) are "too self absorbed" to be bothered w/ the collapse of our nation.
Those that are paying attention are thinking and saying the word that rhymes w/ evolution...sad days when it seems there will be no other way to redress what's gone wrong.
Does anyone think this "investigation" or the coming "mortgage-gate" investigation will get to the bottom of any of this? Full capture and we aren't really struggling to break free (hell, most folks think it the warm embrace of our government rather than the straight jacket it really is).
Don't ya know that "strong checks and balances" = socialism? Stalemate...
I thought the idea was come up w/ a strong governing document and then make it exteremely difficult for folks to override it. Pit equal power accross the spectrum so as not to allow where we have ended up. Unfortnately, brick by brick, we have torn down the walls that divide our branches of government and the entire system has been captured by outside money.
"Voting out the bum's" will change little as the system will more likely change those who enter. The system of money and access must be torn down and rebuilt.
Huh? Name me a socialist country with any checks and balances at all.
All this talk of the US not being a real democracy is so naively optimistic. Sorry guys, this is how your fellow man votes. Nobody ever promised that democracy conferred immunity to manipulation of public opinion.
They dont know what is going on. All they know is if the market donts go up it must be broke. well I gots the news that they IS broke. Furthermore I AINT BUY"N NUTTIN !!! *unless dow hits 2500
Go with the first lie.
let that be a warning for anyone considering selling stock or god forbid going short. The SEC knows who you are and may hold you publicly responsible for your lack of conscience.
PREPARE THE VIRGIN - well close enough..
did anyone think you would get honest - foresight- or intelligent thoughts on the flash crash from the SEC? :) please
Prelim report available
http://www.sec.gov/sec-cftc-prelimreport.pdf
It's not enough satifaction to vent here at ZH, time to seriously make it count.
How can we few, the walking wounded, the impoverished and poor make our efforts count to stop this madness? Vote/don't vote for the existing crook/politician/bankster? Not play or piss in their pool? I'm game!
An unmitigated fning disaster is what the SEC is... that last thing in the world we should give these jokers is the keys to more of the financial world. There are 2 guys at the SEC that even know what an option is or could even spell derivative or even name more than 5 BDs yet we continue to cede power and influence to them to solve our market problems?!?!
They have systematically destroyed our secondary markets at the expense of their on agenda and instead of reversing their destruction they continue to destroy the markets even more with their negligence.
Well, they can't very well say it was to push for passage of FinReg - which was the true reason...
Ayn Rand nailed it 60 years ago. Atlas Shrugged.
Ayn Rand nailed it 60 years ago. Atlas Shrugged.
A $375 million short = 75k emini contracts in a market with average volume in this market at 2.2 million contracts. And this caused a nearly $1 trillion avalanche ?
PSTFU.
Tyler,
Have you tried to contact Waddell and Reed for comment? Looks like SEC using correlation instead of causation. Most likely Waddell & Reed have traded in this manner many times before with obsolutely no impact on the market.
FLASH SCORE
http://williambanzai7.blogspot.com/2010/09/flash-score.html
Waddell and Reed were just the butterflies that flapped their wings in Brazil creating a minute disturbance which eventually became a tornado that came down over Kansas and took Toto on a little ride to the Land of Oz. In other words, the HFT bots are messing with a highly non-linear dynamical system which can go from a hiccup to a major infarct in a matter of milliseconds. As someone else said, the next great crash will start this way with a Flash Crash that gets multiplied and out of hand until it all comes crashing down. There won't be any way to stop it once it gets to an F4 monster.
Been thinking the same thing. With more volume being taken on by HFT and their 'nano-liquidity' (only staying in when *they* want to) we are facing a much larger risk that the next major event will stun even those that remember previous bidless freefalls.
I'm talking order-of-magnitude difference here.
I may be wrong but W&R look like the naive patsies here. They gave way too big of a market sell order to MS, not realizing that in today's market that's basically asking MS to tell the HFTs to manipulate the market down to one handle over the stop-trading limit so that MS can dump you out there.