Questioning The Competency Of The SEC Report's Authors
The fundamental premise behind the entire SEC report is that the accelerated sale of an "outsized" ES block (of 75,000 contracts) caused an avalanche that wiped out $1 trillion in market cap in five minutes. Which very well may have been the case... if the block was indeed big. Below we present the average volume of the front month (on the run) ES traded on a daily basis since the beginning of the year: it average to around 2 million contracts a day. In fact, in the days preceding the flash crash (during which incidentally saw a surge in ES trading to almost 6 million contracts), daily volume was around 3 million contracts. Let's do the math: 75,000 of 3,000,000 is 2.5%! The SEC expects the naive sheeple to believe that a block that was VWAPed (and not slammed on the bid) and accounted for around 2.5% of recent daily volume caused the flash crash??? And that the HFts, who were supposed to provide all this massive liquidity in ES and everywhere else, but decided to shut down, and take away all liquidity, were merely an innocent bystander who gut hurt by W&R's recklessness? Good luck with that. Next week - 22 consecutive outflows from equity mutual funds. Oh, and if the statement in the report: "At the same time, HFTs traded nearly 140,000 E-Mini contracts or over 33% of the total trading volume" is indicative of the competency of the porn addict or porn addicts who wrote this report, we are all doomed.
And here is what 75,000 contracts look like scaled to the previous day's volume of around 3 million ES contracts.