Refuting The SEC's Lies At The Core Of The "Flash Crash" Analysis

Tyler Durden's picture

It is time for the SEC to reissue their flash crash report, and to reconsider their Waddell and Reed scapegoating campaign. Why? Because apparently Schapiro's pawns never realized that the market is sufficiently intelligent to do a complete forensic analysis on W&R's trade into the flash crash, and to take the "regulator's" word for less than face value (after the Madoff catastrophe, what other option is there). We now have prima facie evidence that the SEC is lying. We wonder: just how many pieces of silver did it cost the HFT lobby to bribe Schapiro and her Princeton physicist (what is it about this university and the caliber of "talent" it generates?) Gregg Berman to skew the data so much it is beyond laughable. In our ongoing expose of what really happened on May 6, Zero Hedge is happy to have collaborated with both W&R and Nanex to bring our readers the full truth behind the flash crash. Here it is...

Straight from forensic trade experts: Nanex.

We have obtained the Waddell & Reed (W&R) trade executions in the June 2010 eMini futures contract for May 6, 2010. There were 6,438 trades totalling 75,000 contracts. We matched them by time, price and size to the 147,577 trades (844,513 contracts) in the CME time and sales data between 14:32 and 14:52 (they matched exactly). One-second resolution charts of the W&R trades along with other eMini trades are shown below in various time frames.

The SEC report identified a Sell Algorithm selling 75,000 contracts as the cause of the flash crash. If the "Sell Algorithm" in the SEC report refers to the Waddell & Reed trades, then there is a problem. A big one. Looking at the trades in context with the other trades during that time, they appear insignificant.  The W&R trades also do not occur near the ignition point (14:42:44.075) we identified earlier. Furthermore, the W&R trades are practically absent during the torrential sell-off that began at 14:44:20. The bulk of the W&R trades occurred after the market bottomed and was rocketing higher -- a point in time that the SEC report tells us the market was out of liquidity.

Something is very wrong here.

Since the money transferred in the flash crash is in the hundreds of billions, and since litigation will be inevitable, we would like to give Schapiro the right to defend her agency's findings in a public venue such as Zero Hedge before she has to do defend her misrepresentations of reality (and her reasons for doing so) in a court of law.


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ZeroPower's picture

Excellent information throughout the past week with this nonsense of an explanation from the SEC, Tyler.

If anyone would be interested in collaborating on a scholarly article (would be published) regarding this May 6th issue, please get in touch.

Steve Dallas's picture

I'll gladly contribute crayon drawings.

ZeroPower's picture

Perfect, felt markers are preferred but i will keep you in mind.'s picture

get cheeky and his chalk and blackboard, that is 28 feet long. i know he can do it.

Steve Dallas's picture

I'm thinking rude images of Mary Schapiro...


Sokhmate's picture

I wonder if on the other end it's a (__.__) ? or more of a (__o__) ?

TraderTimm's picture


That's what the ass-terisk is for!

Attitude_Check's picture

I would be interested.  I am a Physicist/Mathematician/Engineer and "can do math"



Cognitive Dissonance's picture

I'm an overextended consumer who "can spend money" I don't have. I'll be happy to dispose of any reward money paid for exposing this fraud. Call me. :>)

TimeToChange's picture

The SEC's report maintains that a large fundamental seller (Waddell) started an avalanche of selling by HFTs.  Looking at the charts, Waddell unloaded size right before Nanex's tipping point around 14:44:20.  From there, the SEC says HFTs began a frenzy of hot potato trading to blow off inventory after absorbing Waddell, driving prices down. 

Vitally important to see Waddell wasn't there during the fall, and it underscores the whole point - HFTs drove the market down all by themselves after Waddell's sells hit the market.  That's what we've been saying all along, isn't it?  HFTs exacerbate price movements with aggressive trading.  "Liquidity providers"?  Sure, just don't hit the tipping point, whatever they say it is, because it's a long way down.

It's great to see these charts.  Why weren't these charts in the Flash Crash report itself? 


bigdumbnugly's picture

somebody with their pants on fire and hanging from a telephone wire over at the sec?

StychoKiller's picture

Combine that with pr0n and the mental picture is just sooo disturbing! :>D

Steak's picture

hi y'all, your favorite cut of meat here again :)  Why do i do / have done these playlists?  I think music and ZH belong together, the beating heart of the revolution if you will.  Plus there are so many great artists out there its not like you can hear it on the radio or hear about it in popular media.  Hopefully I can introduce you to something you like but never would have heard of otherwise (that has certainly been the case with ZH readers sharing songs with me).

meh. (a playlist): 

the next posting of this i'll throw in an extra playlist (mostly rap instrumentals) for those of y'all looking for a smooth wind down of the week :D

ps: bookmark this page to play some of RadioZero's classic sets whenever you have the urge 

TheAkashicRecord's picture

I'm going to see Emancipator and Bassnectar in a couple of weeks ... Bassnectar live is the soundtrack to revolt.

Steak's picture

I'm based in Altanta and just found out Bassnectar is playing New Years at my favorite venue in the universe (the Tabernacle).  I am eagerly awaiting.

TheAkashicRecord's picture

Nice ... I'm in Chicago, we have Pretty Lights on NYE which should also be awesome.  I saw Bassnectar 2 years ago at Lollapalooza, at that point didn't know much about that genre of music, it changed me though.  

Check this Bassnectar clip out, especially from 2:40-3:12, your head will explode.  Can we start a sub-group here at ZH that enjoys raging to this type of music, there have got to be more of us seeing as though it is the soundtrack to revolution.

Steak's picture

oh to be one of those lucky souls dancing on stage.  boom goes the dynamite!

there are indeed more of us, many more, who are all about raging to the sound of this revolution.  i wish there was more to say, i don't have any inside scoop so atm this is more a hope than a promise, but i see tunes being more integrated into this site one day.  keep pimpin, pimpin

TheAkashicRecord's picture

Four Tet next week and Bonobo early Nov, good stuff coming up's picture

oh steaky, your my most favorite. your so generous and kind to start posting your incredible taste in music. i can't tell you how much i love you. your kind and adorable. now can you get cheeky to come back and talk to you, like last winter and spring. maybe he would come back and be heard again. this is all good. kiss kiss, kath.

Edit: H A P P Y     f r i d a y   ALL

Steak's picture

hi everybody!  this individual was formerly known as Velobabe.  its (not sure if its a him or her) modus operandi is to lure ZH contributors and readers with promises of naked pictures.  it has tried SEVERAL times to "out" the identities of ZH members, so PLEASE be very careful if you find yourself in a dialogue with this person.

like cheeky or not, this individual is the reason why he is not here anymore.  be vigilant, the internet can be a dangerous place and this person is a big reason why.

Bob's picture

I would assume that this poster has been tracked to the same IP address?

I've been perplexed by the belief that this "individual" is velobabe because the writing and narative voice are distinctively different, imo.  If the point of origin is the same as velobabe, I would argue that there are two possible explanations:

1)  This is an extremely skilled conman/woman (moronic presentation notwithstanding)


2)  It's more than one person playing this game. 

The game, of course, is extremely transparent, in any case, just sayin' .

reading's picture

'distinctly different' for real?  Seriously, it is totally obvious they are the same simply by the way it types.

Bob's picture

Not to my eyes or ears.  Not that it necessarily matters. 

merehuman's picture

I always assumed she was drunk, sometime sober but lies alot or has multiple lives. 

Once i realized i could be tracked by diverse comments made, and giving out too much info, i changed my lifestyle , own myself more, things less but trust NO ONE but myself. Is survival becoming a lost art?

MsCreant's picture


Steak has no reason to lie. You need to answer this charge. I can check this out for myself, anyway, but I'd like to hear from you if it is true or not. I will not answer your posts anymore until this is cleared up. I ask our community to consider shunning her/it, until we have heard from her/it on this topic. Outing folks here is VILE, HATEFUL, and quite frankly, Borderline Personality Disorder behavior. 

Hephasteus's picture

I actually tracked her down and perused her internet identity. It's not a full hold water type of thing you would expect from a person. I think she is piggy backing someone elses identity that has an actual working brain. She does do drugs. I can empath that and she's drunk and stoned alot. But hey we had coke snorting traders on wall street all during the 80's and prescription drugged ones during the 00's. So why not a drugged out troublemaker.

reading's picture

I know you must have figured out that it clearly has a personality disorder -- you seem pretty no nonsense so your gut must have told she's (it's) not right, right?

williambanzai7's picture

Do Androids Dream of Electric Sheeple?

Cognitive Dissonance's picture


Thank God you're based outside the USA. I think the penalty for defacing an official "senior high member of the white house fraud crew" photo is 10 years of water boarding in Guantanamo plus $100 Million Million fiat bucks.

Hope they take a check. Now, how many zeros in $100 Million Million?

Cognitive Dissonance's picture

The answer to all future CAPTCHA questions in the universe is "Floating Decimal Points".

StychoKiller's picture

I think the picture would be a lot more believable if the circuitry on the head were a lot smaller.

bigdumbnugly's picture

yes, and maybe with a few burned out diodes and capacitors as well.

euclidean's picture

Surely you mean less components - perhaps some antiquated ones like a simple HV throw switch (for on/off), a vacuum tube valve and 2 lamps for yes and no - but no is burnt out.

As an alternative, you can create a toothless tiger caricature, perhaps a circus clown.

unwashedmass's picture

i know, out here in unwashed land, we're supposed to be dumb as dirt, and sitting around waiting for Shapiro to "enlighten" us......


Robslob's picture

Where they will be found "guilty" before ever being allowed to speak.


Like going to an IRS hearing but with the same end result.


Guilty before being "proved" innocent.

sweet ebony diamond's picture

It's time for Mary to run to Lloyd for a little cry.

Sancho Ponzi's picture

Give the SEC a break. It's hard to do real research when you're busy surfing porn and deciding what chinese take-out dish to order.

DTCC 1999's picture

Scape goat excuse for regulatory capture.'s picture

upside down house, good one, sancho ponzi er ello.

MasterB's picture

I dunno - Bart Chilton said they slaved over the charts for days!

scratch_and_sniff's picture

Concerned but powerless. No teeth...they dont want to get to the bottom of it, its probably in national interests that they dont.

max2205's picture

NP. Buy Oct spx 200 calls

Pining for the Fjords's picture

I would be fascinated to know the extent of W&R's cooperation on this-  was it just giving permission, or more active?  I am curious because I had assumed that someone from the SEC quietly told them "We're going to take you behind the woodshed on this publicly, and you aren't going to say shit because we need a scapegoat. Keep quiet and you'll be fine. Nice little business you have there...  shame if something were to happen to it".  Is W&R fighting this in the open? 

It is hard to get one's head around all of the fraud and blatant deception going on right now.  This,  the market green on the foreclosure halt news and poor jobs data...  they aren't even attempting to be subtle anymore.

HarryWanger's picture

It is hard to get one's head around all of the fraud and blatant deception going on right now.

Really? That's how governments keep power. Been this way since the first governing bodies were formed throughout history. Nothing new here. It's inherent in any governing system.

Pining for the Fjords's picture

Perhaps, but my point was that it is the sheer volume, coupled with the lack of subtlety, that is unusual.  So I would argue that the scope and scale ARE sort-of new here. And it reeks of desperation.