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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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Fri, 10/08/2010 - 12:49 | 635586 ZeroPower
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.

Fri, 10/08/2010 - 12:59 | 635610 Steve Dallas
Steve Dallas's picture

I'll gladly contribute crayon drawings.

Fri, 10/08/2010 - 13:01 | 635617 ZeroPower
ZeroPower's picture

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

Fri, 10/08/2010 - 13:19 | 635669 kathy.chamberli...'s picture

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

Fri, 10/08/2010 - 13:30 | 635612 Steve Dallas
Steve Dallas's picture

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


Fri, 10/08/2010 - 13:46 | 635747 TraderTimm
TraderTimm's picture

(o )Y( o)

Fri, 10/08/2010 - 16:35 | 636493 Sokhmate
Sokhmate's picture

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

Fri, 10/08/2010 - 17:51 | 636665 TraderTimm
TraderTimm's picture


That's what the ass-terisk is for!

Fri, 10/08/2010 - 13:54 | 635647 Attitude_Check
Attitude_Check's picture

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



Fri, 10/08/2010 - 14:02 | 635801 Cognitive Dissonance
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. :>)

Tue, 11/09/2010 - 21:51 | 714615 scythian empire
scythian empire's picture


Fri, 10/08/2010 - 13:23 | 635682 TimeToChange
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? 


Fri, 10/08/2010 - 14:12 | 635755 bigdumbnugly
bigdumbnugly's picture

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

Fri, 10/08/2010 - 22:06 | 637115 StychoKiller
StychoKiller's picture

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

Fri, 10/08/2010 - 12:55 | 635589 Steak
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 

Fri, 10/08/2010 - 13:02 | 635623 TheAkashicRecord
TheAkashicRecord's picture

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

Fri, 10/08/2010 - 13:12 | 635648 Steak
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.

Fri, 10/08/2010 - 13:22 | 635671 TheAkashicRecord
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.

Fri, 10/08/2010 - 13:39 | 635724 Steak
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

Fri, 10/08/2010 - 14:16 | 635868 TheAkashicRecord
TheAkashicRecord's picture

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

Fri, 10/08/2010 - 13:26 | 635680 kathy.chamberli...'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

Fri, 10/08/2010 - 13:29 | 635701 Steak
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.

Fri, 10/08/2010 - 13:51 | 635758 Bob
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' .

Fri, 10/08/2010 - 20:59 | 637017 reading
reading's picture

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

Sat, 10/09/2010 - 00:41 | 637315 Bob
Bob's picture

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

Sat, 10/09/2010 - 23:20 | 638810 merehuman
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?

Fri, 10/08/2010 - 14:02 | 635797 MsCreant
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. 

Fri, 10/08/2010 - 16:46 | 636545 Hephasteus
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.

Fri, 10/08/2010 - 21:07 | 637030 reading
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?

Fri, 10/08/2010 - 13:40 | 635590 williambanzai7
williambanzai7's picture

Do Androids Dream of Electric Sheeple?

Fri, 10/08/2010 - 14:24 | 635904 Cognitive Dissonance
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?

Fri, 10/08/2010 - 14:40 | 636000 williambanzai7
williambanzai7's picture

Is this a ZH sign in dialogue?

Fri, 10/08/2010 - 15:25 | 636184 Cognitive Dissonance
Cognitive Dissonance's picture

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

Fri, 10/08/2010 - 17:58 | 636678 illyia
illyia's picture

Ah... I understand, now...

Fri, 10/08/2010 - 22:10 | 637121 StychoKiller
StychoKiller's picture

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

Sat, 10/09/2010 - 09:10 | 637541 bigdumbnugly
bigdumbnugly's picture

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

Sat, 10/09/2010 - 21:29 | 638665 euclidean
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.

Fri, 10/08/2010 - 12:51 | 635591 unwashedmass
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......


Fri, 10/08/2010 - 12:50 | 635592 Robslob
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.

Fri, 10/08/2010 - 12:53 | 635596 Vergeltung
Vergeltung's picture

excellent post!

Fri, 10/08/2010 - 12:52 | 635597 sweet ebony diamond
sweet ebony diamond's picture

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

Fri, 10/08/2010 - 12:54 | 635600 Sancho Ponzi
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.

Fri, 10/08/2010 - 13:26 | 635692 DTCC 1999
DTCC 1999's picture

Scape goat excuse for regulatory capture.   

Fri, 10/08/2010 - 13:27 | 635696 kathy.chamberli...'s picture

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

Fri, 10/08/2010 - 12:57 | 635605 MasterB
MasterB's picture

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

Fri, 10/08/2010 - 12:59 | 635614 scratch_and_sniff
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.

Fri, 10/08/2010 - 13:00 | 635616 max2205
max2205's picture

NP. Buy Oct spx 200 calls

Fri, 10/08/2010 - 13:01 | 635618 Pining for the ...
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.

Fri, 10/08/2010 - 13:09 | 635638 HarryWanger
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.

Fri, 10/08/2010 - 13:22 | 635676 Pining for the ...
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.

Fri, 10/08/2010 - 13:29 | 635702 GNandGL
GNandGL's picture

Nice little business you have there...  shame if something were to happen to it".

You make it sound like the SEC is some sort of protection racket or something...err, nevermind.


Fri, 10/08/2010 - 22:13 | 637125 StychoKiller
StychoKiller's picture

Even if the SEC was correct about W&R, they did nothing illegal!  (even if they did something illegal, how many here think that the SEC/Dept of Justice would do anything about it?)

Fri, 10/08/2010 - 13:04 | 635628 John McCloy
John McCloy's picture

Post of the year right here.
We did not expect Mary Shaprio do issue a report that implicated the Fed trading desk caused this crash to interfere in political legislation right?
Would be interesting to know how the PDs were positioned on that day or the previous day in order to determine if they were not only aware of the Feds intention with insider knowledge but were assistant architects by literally removing all bids.
This is highly illegal activity and should scare anyone when questioning, " what does the federal reserve have on their books that would cause such desperate action?"
If this does not warrant an audit of their trading desk at Liberty what does. I am especially interested in their desks activities on May 6th. Ron Paul should request a congressional committe with reco that an immediate audit of the trading desk and their holdings is completed to determine their role on May 6th. Americans have a right to know what these criminals are upto. I suggest their loaded up with SPY.

Fri, 10/08/2010 - 13:59 | 635788 DarkMath
DarkMath's picture

I don't know if the Sack was involved or the PDs. I tend to doubt it. It sounds like 9/11 conspiracy theory crap.

It doesn't really matter to me. The problem is obviously HFT going into a infinite feedback loop. That's enough of a travesty to warrent the SEC to shut them down. But Mary Shapiro has no balls and she is Wall Street's concubine. She has done nothing and will do nothing. Our government is a fucking farce. As soon as the dollar collapses sometime in the next 4 years the Mary Shapiro's of the world will get their just desserts.

Fuck them all.

Fri, 10/08/2010 - 13:05 | 635629 HarryWanger
HarryWanger's picture

Nice post but you can drop the conspiracy on "bribes". These guys just look for an easy way to soothe the public regardless of who was involved. It's like everything else, issue a big report with blame somewhere and it's over.

Fri, 10/08/2010 - 22:16 | 637130 StychoKiller
StychoKiller's picture


3. Search for the guilty.

4. Blame the innocent.

5. Distinction for the un-involved!

Fri, 10/08/2010 - 13:07 | 635633 papaswamp
papaswamp's picture

Careful ZH big brother is watching and won't be happy....

Fri, 10/08/2010 - 13:07 | 635634 Jack Ryan
Jack Ryan's picture

I'd buy tickets to go to that cross examination.  This was a GREAT opportunity for The SEC to come out and do the right thing.  I guess it was just too easy to lie about what happened. 

But wait a minute, if the SEC is too lazy to check IF trades were done by Madoff, why would they bother to look at time and sale stamps in this case?

Fri, 10/08/2010 - 13:11 | 635643 HarryWanger
HarryWanger's picture

But wait a minute, if the SEC is too lazy to check IF trades were done by Madoff, why would they bother to look at time and sale stamps in this case?

They won't because they don't care. They've put out their report and they're done with that. Markets have "recovered" since then so in their minds no harm no foul.

Fri, 10/08/2010 - 13:11 | 635646 MsCreant
MsCreant's picture

Fight club bitch!



O.K. I apologize.

Mary is actually part of Project Mayhem along with Alan Greenspan and Barack Obama. All of them are doing everything they can to bring this bitch to it's knees because they hate the current monetary hegemony we all live under. All three of them are shocked that we have not taken up AKs and pitchforks against the system yet and wilder and wilder shit keeps getting perpetrated in the hopes that we seize control of the system ourselves and say, "E-Fucking-nuff already!"

Fri, 10/08/2010 - 13:28 | 635698 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Hmmm.  So they are not inept but rather brilliant?  I should be thanking today's oilgarchs, then.  Fair enough.

Alan Greespan singing,

Don't cry to me oh baby!

Your future's in an oblong box, yeah

Don't cry to me oh baby!

Shoulda seen it a comin' on....

Die die die my dollar

Don't utter a single word

Die die die my dollar

Just shut your pretty mouth

I'll be seeing you again

I'll be seeing you in hell!

Fri, 10/08/2010 - 13:39 | 635725 Conrad Murray
Conrad Murray's picture

I often sit in a haze-induced daze wondering to myself how many people not only expect, but want, the revolution.  The blood in the streets, the sulfur in the air, the bodies in the gutter.  And out of them, how many people are willing to die for an ideal?  Not because their family is threatened, or the pathetic little box, built up to keep reality out, is going to be ripped to shreds.  But how many will get out there and fight, knowing what they want after the war.

Barry-the-Terrorist's side sure as hell has a solid vision.  They want a global government under the guise of some Statist idealism that will allow them complete control over their now worldwide feudal mass.  How many people will blindly follow this regime to their slaughter?  What are their numbers compared to those who have actually read things like the Articles of Confederation, the Constitution, the Bill of Rights, the writings of people like Washington, Jefferson and Franklin?  How many understand the true basis of our current situation; the fight between individualism and collectivism, or even between Federalist and Anti-Federalist?

It's one thing to know collapse is coming, and prepare for it.  However, it's an altogether different level of readiness for one to have a cogent plan for the next phase.

Fri, 10/08/2010 - 23:35 | 637244 Al Gorerhythm
Al Gorerhythm's picture

I'd say plenty of people want and expect a revolution but they want and expect someone else to carry it out.

Fri, 10/08/2010 - 13:13 | 635650 Paolo Alto
Paolo Alto's picture

It wasn't the burglary; it was the cover-up. Pointing at the W&R trades was the burglary.

This is a very serious matter.

Nanex's and Tyler's courage and determination are inspiring. I am deeply relieved that America still has heroes at home as well as on the battlefields abroad.

Fri, 10/08/2010 - 13:14 | 635656 The Grifter
The Grifter's picture

Wow.  How many W&R contracts traded before flashpoint on the way down and after flashpoint on the way up over that interval?

Graphs are nice - but putting a number on the bulk of trades on the way up would hammer the point home. 


Fri, 10/08/2010 - 13:14 | 635658 RobotTrader
RobotTrader's picture

Fed Front-Running Pigmen piling into every asset class...

- Fri, Oct 8, 2010 - 12:26 PM anticipation of the absolute, cast-in-stone,
no-alternative-to-it-whatsoever, Fed announcement after the November
Politburo meeting of:

Okay, that's it. We're done pussyfooting around. It's "QuantSleaze
to Infinity and Beyond" time.

Beginning immediately, we will buy every stock bond, futures
contract, dead mortgage, defaulted bank loan, and other deadbeat
obligation, worldiwde, forever and ever amen.

Without limitiation.

Fifty trillion, a hundred-thousand-trillion, it doesn't matter.
That's what we're doing.


The Fed"

...because anything LESS than the above statement released by the
"Money Masters of the Universe" and the carnage will make the previous
"Great Depression" look like a walk in the park.

And poor Doug Noland will be popping Xanax like M&Ms tonight... he constructs his latest issue of the "Credit Bubble Bulletin".

Ras pities poor Doug. The man was ALREADY lamenting the "Ultimate
Bubble" of sovereign debt.

And at this point, all of Mr. Noland's worst fears are being

A speculative mania that is a worldwide version of:



Fri, 10/08/2010 - 13:25 | 635687 MsCreant
MsCreant's picture

I'm terrified that's correct. Can they outsleaze it from turning into hyperinflation (loss of confidence)? Unless everyone is drugged, I don't think so.

All things inflate by this theory, grab anything and play as madly as you can to get ahead of it. But it will wash over us all in a tide of meaninglessness/valuelessness and destruction. No where to run, no where to hide. Then when it washes out, if you have been able to stay alive, what are you holding? If you are holding nothing, you don't make it.

Fri, 10/08/2010 - 13:56 | 635778 ShankyS
ShankyS's picture

Robo, you forgot to add Chia Pets to your list. The special presidential eddition Obama Chia should have made your cut.




Fri, 10/08/2010 - 23:57 | 637270 RoRoTrader
RoRoTrader's picture


I wonder who has been following your calls/long calls starting back on August 31st?

Unless I am missing something then your trading analysis has been the most precient, and most consistent around, not to mention other talents you bring.

Thank you, for whatever that is worth.

Fri, 10/08/2010 - 13:23 | 635659 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture


I cannot possibly express the extent of my gratitude for your efforts.



Fri, 10/08/2010 - 13:15 | 635660 doomandbloom
doomandbloom's picture

can Waddel and Reed sue SEC for defamation?

Fri, 10/08/2010 - 13:33 | 635705 Boilermaker
Boilermaker's picture

Probably not after they accepted their 9 digit payout from the FED to be complicit in this.  You has a 'soothing' effect.

Fri, 10/08/2010 - 13:15 | 635661 Cactus Rocky
Cactus Rocky's picture

No scruples.   I mean, say what you like about the tenets of National Socialism, Mary, at least it's an ethos.  

Fri, 10/08/2010 - 13:19 | 635674 MrTrader
MrTrader's picture

Buahahahha ! Great job ! Excellent ! Is it possible to go for the SEC via Department of Justice ? Go for them !!!! Now !

Fri, 10/08/2010 - 13:26 | 635691 MsCreant
MsCreant's picture

I think Place Holder likes tranny p0rn too.

Fri, 10/08/2010 - 13:34 | 635710 kathy.chamberli...'s picture

msC what is a shemale and tranny porn? i have seen tranny porn listed on google before, but never shemale. maybe i am a shemale, what do you think. like a sexual vampire shemale?


Tranny tube features all kind of shemale and tranny porn and sex videos and movies. Shemales and Trannies all over the world unite to watch free xxx clips

Fri, 10/08/2010 - 14:03 | 635736 MsCreant
MsCreant's picture

Edit: I took down my prior post.

I won't answer you anymore until you answered us above about what steak said.

Fri, 10/08/2010 - 13:19 | 635675 Bankster T Cubed
Bankster T Cubed's picture

the fact that the SEC blamed that day on something so ridiculous is proof enough to me that GOLDMAN SACHS must have orchestrated the whole thing and probably made a few billion doing it

Fri, 10/08/2010 - 13:21 | 635678 Restcase
Restcase's picture

(what is it about this university and the caliber of "talent" it generates?)

Imagine a school where Krugman is a "star" and Helicopter Ben runs the economics department. Then imagine students attracted by such.

Garbage in ...

Fri, 10/08/2010 - 13:25 | 635685 TraderTimm
TraderTimm's picture

Makes me wonder if there are 'botnet' equivalents in the HFT space. You know, pony up some dough because you want to 'flash smash' a stock - but you're not about to start a HFT operation. Just a quick in-and-out, split the profit and nobody is the wiser...

So diabolical, it must be true.

Fri, 10/08/2010 - 13:26 | 635693 bugs_
bugs_'s picture

The sad thing is giving the SEC credit for lying.

The truth is they are out of it.  They have no idea.  They are grasping at anything, cutting and pasting, hoping nobody will figure it out.  Clueless and unable to effect change because it means THEY have to leave.

Fri, 10/08/2010 - 13:37 | 635719 MsCreant
MsCreant's picture

The Tyler & company analysis up there, while great given the context of the situation, is actually very simplistic and an obvious thing to do. Even I concocted the possibility of doing something like that, and I am not a quant and not that talented in math. SEC did a poor job of covering their asses, putting out their explanation of things. Either they are really stupid (no one over there understands the materials taught in a basic stat course) or they were desperate and stalling for some time.

Fri, 10/08/2010 - 13:32 | 635706 ufamizm
ufamizm's picture

This is a beautiful piece, Tyler. You may well be next after wikileaks on the Ministry of Truth's hit list, but i commend you on your attempts to expose the depths of corruption in America to a little light.

Fri, 10/08/2010 - 13:35 | 635713 crosey
crosey's picture

Mary's team has lost their edge,

A vigilant watch was to be their pledge,

Now they scurry, hurry, scramble,

What is now known is just the preamble,

You cannot hide behind the (Zero) Hedge.


Fri, 10/08/2010 - 13:36 | 635715 colonial
colonial's picture

A few points...

As for whether W&R is involved in any of this, the observations above are not valid.  Any large mutual fund, or investment concern, fears the SEC not for what it does, but for its incompetence.  As long as whatever happened does not trigger a visit from idiot reps from OCIE, W&R will take the hit.  If the SEC knocks on their door they will definitely find something wrong, even if there is nothing to find. 

Second point...Tyler, why are you limiting this to the SEC?  The report was the joint effort of the SEC and CFTC.  Gensler and Schapiro have been interviewed since the report and been very careful in their comments. 

My personal view is that they know how bad this system is but have yet to figure out what to do and had they been complete and truthful with this report it would have led to more flash crashes.  Isn't it possible that they are working behind the scenes to fix this mess because they know how dangerous it is? 

Okay, ZH readers...take your best shots at me

Fri, 10/08/2010 - 13:43 | 635731 MsCreant
MsCreant's picture


Its okay, you can talk to us. We want to help you. We know you are in a trap you can't get out of. We feel sorry for you. The thing was screwed long before you got in there sweetheart. You are just a patsy they are setting up for a hell of a fall. 

Was that the kind of shot you were looking for? :-)

Fri, 10/08/2010 - 15:28 | 636199 Cognitive Dissonance
Cognitive Dissonance's picture

They are simply following orders.

Intelligence Czar Can Waive SEC Rules

Now, the White House's top spymaster can cite national security to exempt businesses from reporting requirements.

President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations. Notice of the development came in a brief entry in the Federal Register, dated May 5, 2006, that was opaque to the untrained eye.


Fri, 10/08/2010 - 15:31 | 636217 blunderdog
blunderdog's picture

Isn't it possible that they are working behind the scenes to fix this mess because they know how dangerous it is?

No, that's not possible, because the obvious step of a temporary HFT moratorium hasn't been tried.

Fri, 10/08/2010 - 13:37 | 635721 working class dog
working class dog's picture

Schapiro should join the ranks of the other gubbament officials bailing out, as she is and always will be wall streets madaam.

Fri, 10/08/2010 - 13:42 | 635729 NotApplicable
NotApplicable's picture

If she even bothers to mount a defense, I'd say Shapiro will do the classic political move of repeating their initial conclusions ad infinitum, while refining/redefining the narrative. It will go something like this

We never claimed that W&R caused the flash crash, we merely stated that their algo triggered it, causing the other HFTs to go berserk. Therefore, there is nothing in our initial findings to prove or disprove.

Then if you go after the answer to the question, "How are their actions the trigger?", they will point at their initial data and go "See, it's all right there." without going into any further specifics.

Fri, 10/08/2010 - 16:15 | 636411 espirit
espirit's picture

Still eligible to be revised upward/downward (choose one) indefinitely until it is forgotten in the midst of real chaos.

Fri, 10/08/2010 - 13:49 | 635754 fiftybagger
fiftybagger's picture

Joseph P. Kennedy was the ambitious son of a prosperous Boston saloonkeeper and ward boss. He married the mayor's daughter, went to Harvard, and generally made the most of his ample connections and talent. He ran a bank at twenty-five and was number two man at a shipyard with more than two thousand workers during World War I. At thirty he became a stockbroker and made a fortune through insider trading and stock manipulation. He was a master of the stock pool, a then-legal stunt in which a few traders conspired to inflate a stock's price, selling out just before the bubble burst.

Kennedy's first major involvement in a national political campaign was his support in 1932 for Franklin D. Roosevelt's bid for the Presidency. He donated, loaned, and raised a substantial amount of money for the campaign. Roosevelt rewarded him with an appointment as the inaugural Chairman of the U.S. Securities and Exchange Commission (SEC). Kennedy had hoped for a Cabinet post, such as Treasury. After Franklin Roosevelt called Joe to Washington to clean up the securities industry, somebody asked FDR why he had tapped such a crook. "Takes one to catch one," replied Roosevelt.[12],_Sr.

Fri, 10/08/2010 - 14:07 | 635824 NotApplicable
NotApplicable's picture

Well, it's good to see they've got a tradition to uphold.

Fri, 10/08/2010 - 14:19 | 635882 Augustus
Augustus's picture

Great Post and Information. 

Fri, 10/08/2010 - 14:40 | 635989 doomandbloom
doomandbloom's picture

could Nanex let us know how many much time and money they spent on this analysis ?


It will put the whole budget of SEC in perspective

Fri, 10/08/2010 - 14:44 | 636018 Jonas Parker
Jonas Parker's picture

I probably woulfdn't be worth a damn on the math, but I'm a journeyman proofreader - former public affairs officer and I offer my talents to proofread the article before you submit it.

Fri, 10/08/2010 - 14:46 | 636027 doomandbloom
doomandbloom's picture


Fri, 10/08/2010 - 14:50 | 636046 anonnn
anonnn's picture

If you were looking for fraud and found the SEC principals, it would do nicely.

Such misrepresentation of their mission!

Fri, 10/08/2010 - 15:13 | 636061 Threeggg
Threeggg's picture

The MSM is starting to question why the markets are up ?

It doesn't even make sense to them !

Reporters from the trading floors are using the words like "Unbelievable" - "Unreal" -  "Unexpected" -  "Suprising"

Then the reporter on CNBC says...... wait for it, wait for it......  "Maybe we are in a market where bad news pushes the market up" 

Huh ?

The new Chant is..............

Dow 11,000 - Dow 11,000 - Dow 11,000 !

Followed by

QE-2, QE-2, QE-2  !

I am telling you this market is on Death Watch !

Bubbles are everywhere except for PM's

They can't continue to POMO the component stocks for ever. Can they ? 

Just 1 (one) pinprick and it's gonna come down

Faaaaaaaaaasssssssssttttttttt > !

Good luck Bitches !

P.S. Thanks again TD great evidence there.

Fri, 10/08/2010 - 14:57 | 636073 chancee
chancee's picture

Tyler... you should send all this kind of info that shows Waddell and Reed are innocent to '60 Minutes'.  They're doing a piece on HFT this Sunday.  I read somewhere they're interviewing SEC, etc.  It would be nice if they had this kind of info available.

Fri, 10/08/2010 - 23:50 | 637257 trav7777
trav7777's picture

wtf would 60 Minutes want with the truth?  LOL

Fri, 10/08/2010 - 16:02 | 636080 Voluntary Exchange
Voluntary Exchange's picture

Questions:  What percentage of the US equities float is now controlled by "Institutional Investors", "sovereigns", and so called "insiders"? What percent is still considered "retail"  or small investors? What percent is every one else not covered in the above?


What level of  liquidity expansion would it take for how long for there to be a, practically speaking,  effective buy out of the "weak" holdings in the above breakdown by the "strong" holders?


Let "weak" be defined as those holders who have a net loss  Since March 2009 lows but are still in equities and "strong" being everyone else. 


It would be interesting to know what percentage of "strong" hands also correlate to those entities that hold  large amounts of "toxic" assets and/or benefit from being able to evade "mark to market" accounting and/or have demonstrated an ability (so far) of not being forced to sell assets that might result in  material/substantial net losses.

Another question, during the May flash crash which groups (if any) in the above percentage breakdown realized a profit during this crash period? Which groups realized a loss during this period?

Fri, 10/08/2010 - 15:04 | 636110 topshelfstuff
topshelfstuff's picture

RE: Lies, Credibility. I was surprised yesterday finding right up front on my Yahoo News homepage an article about the cover-up, lies, about the Gulf/BP disaster. If gov agencies can lie about things that could cause people to get sick, to die, how much more easily would lies about the Market, data on unemployment, CPI, etc. be.

I haven't heard this on TV News. I guess its not allowed. Here is a link to the MSM report and this puts a light on reports made months ago, though overlooked.

I'm including a link to a Youtube, one from Anderson Cooper. I'm intentionally posting the 2 most Main Stream, though there were plenty of others that came down harder. Just what will it take before People wake-up. How much more is there that hasn't surfaced yet, if it ever?

White House blocked BP oil spill estimates: panel


Government Suppressing The Truth Knowing The Disaster Coming Will Likely Kill Many People

makes this July 8 article worth getting back to

BREAKING NEWS - EPA and BP lie about reducing dispersants!

BP Investigation Blocked By Senate

The senate blocks investigation of BP.
The House voted 420 to 1 to give the presidential commission investigating the BP oil spill in the Gulf of Mexico full subpoena power.
The Senate blocked it.

[ the clip ends with "Who are you protecting? What are we hiding here?" ]

Fri, 10/08/2010 - 15:15 | 636126 His Dudeness
His Dudeness's picture

Question: Whenever the financial meltdown happens, for anyone who has taken the step of owning physical gold, silver, mercury?, what advice do you offer for practical daily transactions? (other than using a dozen eggs to pay off your house)

For instance, if you have gold bars, gold coins, or gold teeth, which are worth at the time $1300/oz or maybe $15,000/oz, are you going to use up all your paper FRNs first for daily transactions? Are you looking at overpaying for lots of items because other people are not comfortable with, or used to, taking gold payment for that Footlong sub, that mcnugget or that costco survivor pallet? Big items only?

Does the ampex gold package come with multilingual instructions?


Has anyone thought this all the way through? Did I miss that meeting?


P.S. This is all just theoretical right now, but still...

Fri, 10/08/2010 - 15:18 | 636151 Threeggg
Threeggg's picture

It's been thought out thoroughly for 10,000 years.

Sorry you missed "All" the meetings. !

Fri, 10/08/2010 - 15:21 | 636165 His Dudeness
His Dudeness's picture

So you'll just flip your gold coin to the McRepresentative or some other clerk, and your change will be coming back to you no-problemo? Really? Did I miss that meeting too?

Fri, 10/08/2010 - 22:28 | 637149 StychoKiller
StychoKiller's picture

Give them a big, wet kiss if that will suffice for the McNuggets!

Gold is wealth insurance and should only be used in desperation or if the bomb craters have grass growing in them.

Sun, 10/10/2010 - 06:08 | 639046 lewy14
lewy14's picture

if the bomb craters have grass growing in them


Fri, 10/08/2010 - 15:54 | 636331 blunderdog
blunderdog's picture

Try to establish a *group* of people who have complementary abilities and interests.

You don't want to swap even a silver coin for one loaf of bread, but if you needed 20 loaves of bread because you were buying for 40 people, it would make a bit more sense.

One of our species' big survival advantages is the ability to work together.

Sat, 10/09/2010 - 11:23 | 637791 His Dudeness
His Dudeness's picture

Thanks for the practical advice. Appreciate taking this green-horn's question seriously.

Let me know when that next meeting is held!!!

Sun, 10/10/2010 - 06:12 | 639048 lewy14
lewy14's picture

pre-1964 silver coins. Dimes, especially.Why?

+ Plentiful (many people have hoards of these; they will start spending them and they will circulate).

+ Self-authenticating - we all know what these coins look like; they are un-econimical to fake.

Fri, 10/08/2010 - 19:42 | 636904 faustian bargain
faustian bargain's picture

What's wrong with using eggs? After a currency collapse, barter is going to be all many people have for a while. Eventually coins and other money backed by metal would make its way into circulation. I can't envision many businesses that rely on JIT inventories lasting for very long, immediately post-collapse.

Fri, 10/08/2010 - 17:55 | 636673 illyia
illyia's picture

Hey! How come this is not headlining the page?

This is really important, obscure, difficult stuff.

It should be given to ZH readers as homework - not left to drift downward.

I will copy and study until I understand it!


Fri, 10/08/2010 - 19:35 | 636893 gwar5
gwar5's picture

ZH has been on this story like white on rice...keep it up. They're running the clock out.

Scapegoating means they're protecting someone. Probaby themselves for having more than a fat finger in their hands while watching porn. FOIA act silence when new financial bill takes effect.

Fri, 10/08/2010 - 23:54 | 637263 trav7777
trav7777's picture

W&R *was* responsible.  Because they tried to sell.  Selling is a threat to national security, as we saw.

There are no size buyers under the market, only HFT quote stuffers looking to get the HELL out of the way if anyone tries to hit their bid.

They can frontrun your freaking ask and drop their own bid.  So your algo tries again to "sell at bid" and the cycle repeats.

Sun, 10/10/2010 - 09:32 | 639146 MsCreant
MsCreant's picture

That was really clear.

Sat, 10/09/2010 - 00:37 | 637310 poydras
poydras's picture

Can someone please post the USDJPY chart/trades during that time period?

Sat, 10/09/2010 - 01:32 | 637350 CustomersMan
CustomersMan's picture



In case you guys are wondering,...the question when prices are high, JUST WHO GETS TO SELL AT THOSE PRICES?


Its like when oil went to $147 , who exactly got to sell their oil at those prices

Not enemies of the U.S. , chances the oil sold there were friends of Bush. So the price was high,...but if you never got to sell, what does it mean? Certainly, not the enemies of the U.S. got to sell their oil at $147.


Its like if Osama Bin Laden won PowerBall, had the winning ticket in his hands, do you think they would let him Win the jackpot? Really?


Same as at the bottom,...who gets to buy at those prices.


I will give examples later.

Wed, 10/27/2010 - 08:35 | 680090 daniel
daniel's picture

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Fri, 02/25/2011 - 07:22 | 996401 george22
george22's picture

I don't know if the Sack was involved or the PDs. I tend to doubt it. It sounds like 9/11 conspiracy theory crap.

It doesn't really matter to me. The problem is obviously HFT going into a infinite feedback loop. That's enough of a travesty to warrent the SEC to shut them down. But Mary Shapiro has no balls and she is Wall Street's concubine. She has done nothing and will do nothing. Our government is a fucking farce. As soon as the dollar collapses sometime in the next 4 years the Mary Shapiro's of the world will get their just desserts.
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