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I-L-L-I-Q-U-I-D-I-T-Y...
I'm hearing rumors of computer/exchange problems being blamed for intensifying today's selling. Suggests to me the possibility of quant funds forced deleveraging, as momo unwinds + program trading = forced quant unwinds, and even further illiquidity, intensifying the positive feedback loop. More as it comes, if it comes...
EDIT (4:30 PM): Lots of talk about a Citi fat finger. Not sure how believable I find this. But more importantly, the carry trade/risk on-risk off nature of this market was exposed today, especially in regards to the USD vs JPY. With perpetual ZIRP, the JPY has been the carry currency of choice for years. But going forward, especially post-crisis (when JPY surged as carries unwound), JPY/JGBs are terrible safe havens considering Japan's ballooned debt/GDP, and USD is a more favorable candidate at least in relative terms. Today's absolute plunge in USD/JPY shows how much of the rally since March 2009 was due to traders carrying low yielding currencies to chase yield. Absolutely a function of excess liquidity. And as far as market liquidity, today also exposes how little exists in this market.
EDIT (8:08 PM): A little credence to the algo-driven JPY carry unwind thesis to explain the mechanics of today's plunge, courtesy of Bruce Krasting:
As of this writing none of the big trading houses has fessed up to adding a zero on an e-mini electronic order. We shall see. I think it was connected to a move in the Dollar/Yen. When that break occurred it triggered some algo machine to sell. And that happened when the NYSE had a halt.
It was computers that are behind it. Mary Shapiro at the SEC has been very reluctant to tackle this issue. Not any more. Look for her to make a statement shortly. The axe is going to fall on an important part of how the markets function.
Either way some damage was done. This is a picture of one stock that traded 3450 shares at .01 cent or $34.50. It was worth more than$140,000 at the close. The trade above for 7,254 shares at 41 cents resulted in a paper gain to someone of $300,000. These will be reversed. What a system.....
And check out some anecdotal comparisons drawn to September 30, 2008 (right at the onset of the 08 market crash), as pointed out by multiple readers:
Sept. 30 2008
NEW YORK (CNNMoney.com) — An accidental trade drove shares of Google Inc. to unbelievable lows Tuesday, causing the Nasdaq to correct the stock’s closing price and adjust the index’s final value.
The Internet search engine’s stock appeared to have plummeted to a low of $25.80 at one point during the session. Shares opened at $396 and traded in a relatively tight range before dropping sharply near the close of trade.
“A market participant sent in a large number of orders and drove the price down at approximately [3:57 p.m. ET] which caused the bid-offer to be artificially low due to their mistake,” according to a Nasdaq spokesman.
Google’s (GOOG, Fortune 500) official closing price will be adjusted to $400.52 from the original, inaccurate settle price of $341.43. And the closing value of the Nasdaq 100 Index will be changed to 1594.63.
Nasdaq said that it will cancel trades made at or above $425.29 and at or below $400.52 that were executed on the Nasdaq between 3:57 pm ET and 4:02 pm ET.
The closing value of the Nasdaq Composite Index and several other related products will also be adjusted.
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thanks...there a two things insiders always say to cover their tracks - they are "it was a glitch" and "who could have predicted this?!"...both memes are to try to characterize these things as exceptional outliers when in fact the are predictable results....who could have predicted this?: - TYLER DURDEN!
At first glance, the fat finger seems plausible. I understand how an order for 10 billion shares instead of 10 million can wipe out an order book. Happens to P&G, ok, I'll belive it. ACN next, now I start to wonder.
WSJ is reporting 7 others sold for 1 cent or less
http://blogs.wsj.com/marketbeat/2010/05/06/dont-feel-bad-accenture-these...
Look at the low prices of .0001 Aren't these are the same increments the bots use to front run orders? Did one fund dump all of 9 these stocks?
whatever.. it triggered the algos.. how else can you one explain:
"Among others affected were shares of technology consultancy firm Accenture, which fell to a penny before bouncing back to close at $41.09."
Willzyxxxx:
" Look at the low prices of .0001 Aren't these are the same increments the bots use to front run orders? Did one fund dump all of 9 these stocks?"
bless you my child!!!!! absolutely brilliant!!! that's what i love about this site; how we morts, in our "heavenly ignorance" have the innate ability to intuitively understand and articulate the most convulted phenomena.
yeah, somebody bit the dust, dumped all that paper, and the front running algos just got there a few nano-seconds too late.
Thanks for the props. To further elaborate, look at the print of the tape. Tiny little orders. 100 shares at 0.88, 200 at 0.50, another 200 at 0.42, until it hits the honey pot at 0.41 and executes for 7254.
We have all heard about this HFT tactic. Use small orders to make other participants reveal their true intentions, then pounce on the big ones
Assuming they use the "b" and the "m" on a keyboard the fat finger seems unlikely. Anyone who types knows you hit the "m" with your right finger and the "b" with your left. Crossing over is awkward to do unless you are not a typist ... which begs the question; who the fuck on Wall Street that does not know a keyboard and type would input a trade worth potentially hundreds of millions of dollars?
and if it was a fat finger, the 'n' key is in between the 'm' and 'b'
Is a nillion a negative million or german for 'no bailout for you'?
I guess the systems that they use to electronically sell or buy don't have limits on it. Because I just can't see a broker or trader by himself being able to buy or sell 10 billion shares at one time without a warning or stop or notify to there people. Because if thats the case, then a broker or dealer can set up a situation where he has family members or people he know to buy up or go short certain stocks or the market and then on purpose fat finger a massive sell or buy to make the market buck one way or the other. And then if its his fault, he's fired but he made with the help of others making trades for him or her millions.
There's something more to this and I don't believe it was a fat finger.
Buck:
" I just can't see a broker or trader by himself being able to buy or sell 10 billion shares at one time without a warning or stop or notify to there people. Because if thats the case, then a broker or dealer can set up a situation where he has family members or people he know (COUNTERPARTIES) to buy up or go short certain stocks or the market to make the market buck one way or the other. "
Congragulations. You have just described, in easily understandable terms, the inner mechanics of how this market works.
No one has mentioned a system hack. Certainly seem this could be a very effective way to attack us.
BTW, Bruce was wrong.
That bottom trade cost $0.345 to execute, or 34 cents...
It was caused by a North Korean submarine.
I think it was caused by the final ricochet of Kennedy's lone gunman's "magic bullet".
My "fat finger" theory is that one of these idiots caused today's panic selloff:
God, if that psychopath Geithner doesn't look just like Beavis!
Has about as much intelligence and integrity, too.
akak:
and summers looks like butthead.........................
what a pair to draw to
I was gettin more of a count chocula vibe...
http://paxarcana.files.wordpress.com/2008/10/count_chocula.gif
Yeah, that kinda where I was going - but more Eddie Munsterish.
"The fingers you have used to trade are too fat. To summon plunge protection, please mash the keyboard with your palms ... now."
Leo:
an apparently heavily medicated turbo timmy is signing the "devils horn"
HF KLEPTO TRADING:
http://williambanzai7.blogspot.com/2010/05/high-frequency-klepto-trading...
But this "glitch" advances a couple of the Regime's agenda items:
1) We need financial "reform," Now!
2) The markets are inherently too risky for important savings, like pension funds, so they will be nationalised and put into AAA-rated, 100% guaranteed US Govt. obligations. Let's call them Pension Anticipation Bonds Liquid Upon Maturity (PABLUM, and the maturity is defined as your expiration date)
MAY 1st :
"The weekly DOW chart shows an expanding wedge indicating a significant move is probable. This remains an overbought bear market rally and the uptrend could falter at any time"
http://www.zerohedge.com/forum/latest-market-outlook-0#comment-326767