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Was The April 28 Mini Flash Crash A Grand Rehearsal For The Real Deal A Week Later; If So, By Whom?
One of the scarier conclusions arising from the work of the market forensic specialists at Nanex is that with a surge in empty order packets and quote stuffing one can essentially recreate the flash crash "on demand." We have pointed out previously how while an outright market crash may not have been the goal, the NBBO arbing opportunities created may make such periodic activities quite profitable. Which is why we read with great interest Nanex latest analysis of an event that nobody has discussed in the mainstream media or elsewhere yet, namely the "Mini Flash Crash of April 28, 2010", 6 trading days before events from May 6 wiped out 1,000 DJIA point briefly before a massive (forced?) short covering surge left the market virtually unchanged. Did someone attempt to create the flash crash a week early? And if so, were the events of April 28, merely a grand rehearsal for the May 6 "real deal." We can't wait for the SEC's final report on all these very much open questions.
From "The Mini Flash Crash of 04-28-2010"
While scanning historical data searching for previous days which exhibit similar behavior to that of 05/06/2010, we found a time on 04/28/2010 with quote bursts very similar to those we saw on 05/06/2010 (just prior to the NYSE feed delay). The time of this quote burst began at 11:27:46.100 on 04/28/2010.
We have determined that quote rates above 7,000 to 7,500 per 25ms interval (280,000 to 300,000/sec) will saturate (stuff) CQS+UQDF (note the quote/trade rate charts are in 25 millisecond resolution).
(click on image for a high resolution view):
Note the eerie similarities at the start of the drop on 04/28 and 05/06 in the
chart below:
(click on image for a high resolution view):
This event triggered a delay in several NYSE stocks beginning at 11:27:47. Show
below are the SPY EMINI and the DJI:
We decided to investigate this further to determine if any stocks experienced
the same delays from the high quote activity as those we saw on 05/06/2010 and
reported on in our initial Flash Crash
Analysis. We found many.
Note that this was just one week prior to 05/06/2010, the day of the flash
crash.
While less drastic, the event was very similar to that of 05/06/2010. Huge
bursts of quotes flooded the system and almost immediately NYSE quotes began to
lag the market. CQS would choose the stale NYSE quotes as the BBO, the same as
we described on 05/06/2010 in our report "The NBBO is Broken".
The following images show many of the stocks with delayed quotes on 04/28/2010, although it is by no means a complete list. It should be noted that NONE of the stocks listed below were reporting 'slow mode' quotes. All of the quote data recorded was sent as normal, quote condition 0 quotes. Trading was also occurring on all exchanges at different price levels.
(click on any image for a high resolution view):
ADM:
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AXP:
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CVX:
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HD:
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HPQ:
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JNJ:
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JPM:
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MMM:
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MS:
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PG:
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UN:
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UNH:
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USB:
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WFC:
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WMB:
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XTO:
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»
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FED will reply with the standard Orwellian form letter- 'As you already know, the FED does not manipulate the markets'.
Free Market Capitalism is the best path to (electronic warfare on the market system to take all the cash in the shortest possible time) Prosperity.
That is one (debunked) notion, anyways.
By the way, just what do you consider to be a free market nowadays? The last I checked, finance was one of the most highly regulated areas, other than healthcare, insurance, labor, transportation, food, energy, etc.
For example, the NYSE is protected from competition by a myriad of regulations. This allows them to stay in business, despite total failure of their systems. Whether this is an engineering failure, lack of (or inappropriate) capital investment, or some other management incompetence, the fact remains that their system is not well-behaved, from the descriptions posted here on ZH.
One can choose this fact to focus on destroying (by yet more regulation) arbitrageurs, or on repealing the arbitrary and capricious regulations that protect the incumbent market providers. Then they would either figure out how to re-engineer their systems or else be put out of business by others who could.
If you had a free market in adjudication services a system of consensus justice would evolve consistent with such basic principles as non-fraudulent transaction conduct that would find the type of deception and fraud such as the microsecond spam quote and mega quote manipulation as a crime and an attack on a market service provider's private data system, thus subject to a judgment of restitution should any damages arise.
It is interesting how unhappy you appear towards what seem to be the trigger words "Free Market Capitalism" because I am guessing you lack understand what the elements of a free market would actually look like. We don't have one, we have a system of crony capitalism under the predation of fiat debt money and criminal syndicates that pretend to be providers of "governmental" type "services" (non-voluntary exchanges do not provide a "service" but are acts of crime immune from the natural corrections inherent in free-market provision of services, especially those usually associated with the word "government" such as adjudication or security services).
If would would like to understand the words you seem to be sensitive about maybe you could study the school of "Austrian" economics as a start at mises.org, particular Murry Rothbard's work.
So it's the Fed colocating its servers?
Yeah, it couldn't be private firms trying to make money. It has to be the Fed. Absolutely. We all know, in advance, who the villain must me. Therefore it is true.
Yeah, has to be the Fed. Couldn't be private firms. Not possible.
Agreed, the Fed has other established methods for moving the market.
If I wanted to attack the US (let's be clear, I don't) I would obviously not do it militarily, I would find some point of vulnerability. So, where is the US vulnerable right now? Our financial system is definitely crippled; how many more hits before it collapses? What would it take to collapse it? What if we destroyed confidence in the system? I think that destroying the enemy's confidence in its equipment is a tactic of asymmetric warfare.
But, I would not want to get caught because the US government would make a great spectacle of the terrorist threat I present and energize its populace against me, so I need a fall guy. The greed motivator is so strong and well understood that it is precisely where any investigator would look first in cases of problems with the stock market, that could be a convenient distraction while I am covering my tracks.
Good thing the US doesn't have any enemies who do anything like that.
"Good thing the US doesn't have any enemies who do anything like that."
Curious, by 'US' do you mean the voter or the planet pervading policy perverting plutocrats entrenched from head to bowel within their political structure?
I look forward to your response...
Maybe they are working together? The FED lending money to the banks at 0% or low interest then buying UST and earning 3% , then borrowing against the UST for cash to pump up or take down the market, since some of them do provide liquidity to the exchanges. Who owns the FED? Other banks.
oh please, you think they got their A team on this at the SEC? i hear those guys are dedicated 24/7 to the Mark Cuban thing...you know, they need a headliner victim to make it look they are doing something.....so ginning that baby up again.....
Perhaps you are confusing the true intent & purpose of the analysis. Rather than serve as a mechanism for identifying potential vulnerabilities in which to rectify, consider that it's actually a resource for identifying potential vulnerabilities in which to exploit.
I used the following example in an earlier post which might help further explain this concept of looking at what appears to be an obvious truth from an entirely different light:
Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed.
Now, I would guess most people would read this passage from the standpoint of the oppressed. But what about re-reading it from the perspective of the power-elite? Along the same vein as "To Serve Man", isn't TJ really reassuring them that they can do what they're doing right here & now, as documented on an almost hourly basis @ ZH, without fear of reprisal?
Consider this analysis of the Weimar hyper-inflation @ AMI:
http://www.monetary.org/amacolorpamphlet.pdf
The German hyperinflation is cited by the private money gang without pointing out that the German Reichsbank was privately owned and controlled, or that the hyperinflation began the month that all governmental influence over the Reichsbank was removed on the insistence of the allied occupiers.
Zarlenga goes on to document that the Reichsbank was actually lending money to short-sellers who were driving the mark down, to the point where all confidence was lost, which culminated in hyper-inflation and reaped fantastic rewards to the shorts.
What does this tell us about today? What I'm driving at (a theme I was addressing awhile back) is that in the game of global dominance, there isn't just monolithic group working in lockstep, but rather a group of players, each of whom is attempting to out-contest the others.
The markets are just playgrounds in which to experiment with and execute certain exploits. The intent is not to solve problems nor correct vulnerabilities, (or heaven forbid, restore a mechanism for price discovery, capital allocation, etc [LOL!]) but to win.
Really enjoy reading your posts.
Though think the market is a little more then an experiment. It allows the control of the flows of capital, more money, and propaganda.
Naturally there is competition even among groups that appear to be working together. However does it matter to us little guys? And what I mean by that is does it matter to us if Mr. X bests Mr.Z if the rough goal is the same?
Terrific post. Hope you guys will be persistent on informing us on this type stuff.
Once again I shall shamelessly promote my "fictitious" article where I put forth the idea that the flash crash was deliberately created. BTW I've decided to write an entire novel surrounding this one idea, which I'm writing now.
http://www.zerohedge.com/article/call-%E2%80%93-fictional-look-25-minute-market-crash
you did indeed call it, I enjoyed that a lot at the time, and actually surprisingly plausible these days
do you have a title yet?
Just a working title, which I would prefer not to name at the moment since I'm only now beginning to shop it around. I've re-written the first chapter, which I posted here, into a more "novel friendly" format.
Incidentally I've already had one solid rejection. But not for poor writing. The topic was "too sensitive". Isn't that interesting? Too sensitive! What the hell does that mean when the book is a piece of fiction? Too close to home?
I know what I'm up against and if I have to self publish, so be it.
CD: The Tom Clancy of financial terrorism.
This is extremely interesting. Nowhere but ZH will you find this story yet it may be the most significant forewarning yet of events to come.
the perp prolly looks like this:
http://www.justicejunction.com/Assets/gatesmugshotboth.JPG
So was Gates trolling for hookers or code? :>)
he's more evil than that.
death panels that kill granny.
(@2:00)
http://www.youtube.com/watch?v=03MZG9vK0W8
vaccines that make people sterile:
(@2:28)
http://www.youtube.com/watch?v=03MZG9vK0W8
Okay does anyone think that they can get to be a billionaire and be a good guy? You don't play ball then the big boy club gets nervous and would rather not see you come up. Granted PR can work wonders. Look at Jobs, legendary thief and pirate, and he is thought of as a good guy. Look at Buffet.
Hey CD, when do you think it will be finished, and where can we get a copy?
i loved that article CD...i dont think u can call it fiction any more...
But still I must since I have not a single shred of evidence to support my fiction. Besides, fiction is always much more believable than real life. At least until the past few years.
We all know that if I had published that article the week before the flash crash, I would have been laughed out of ZH as going over the top with my fictional conspiracy theory mongering. Even three days after, many people thought it fun, amusing even, but not plausible.
But now, as more evidence comes out, people are saying to themselves "isn't that interesting"?
Let me know if you need a cover design
I shall keep you in mind. I'm sure we can barter something. Thanks.
Johnathon Swift had not 1 shred of evidence. And plenty of Royal intimidation . Gulliver's Travels is worked for him.
UBIK
http://williambanzai7.blogspot.com/2010/09/ubik.html
Hey Mary!
Somebody just did the hard part of your job for you. Now you get the fun part. All you have to do now is sign some warrants and kick down some doors.
May I encourage the liberal use of tasers. Would be fun to see how a colocated server responds to that kind of voltage.
Waiting on the SEC? You gotta be shitting me. That group of assclowns couldn't find their asses with both hands in the dark. Good luck with that T.
no, no...you will not be "shit upon." these..."assclowns" as you call them are i surmise from this title going to issue a "total exoneration" implied herein as "the exact opposite of the truth" and "done so with intent to deceive." but this interpretation "may not necessarily be true" for "what is truth...really."
I guess we stay tuned for "the Mother of All Flash Crashes".
Big money flushing out the others taking from the great market tit. The elites rule this house, not Helicopter Ben, Timmay or any other blowhard. Ecomomic terror to the maximum!
Great post, great comments. Now get the fuckers.
Enforcement is the fail to embrace. The SEC could stop the fearsome practices instantly by linking the system that rewards liquidity with fractional cents to include a decremental module that whacks the account for cancellations exactly in the abuse range of the system. This was impossible and inconceivable with Specialists. We must keep a connection to human response time if they expect civilian retail to enter the space again. Now the Humans will be FED ETF derivative instruments that will appear to be a fix when in fact it will mask the next trick.
Yup! That's PRECISELY WHAT WE NEED!
In order to make markets more efficient, we need to slow them down. Computers have improved every other aspect of our lives, so let's BAN THEM IN TRADING!
Let's go back to the days when people screamed at the tops of their lungs waving scraps of paper in eachother's faces!
Umm, by the way, retail investors don't need to know or care that professionals can react faster. Retail investors need to know that the price they are offered or bid is lower or higher than their assessment of value.
Exactly so, tonyc. Your "failure to embrace" aptly directs attention to possible solutions...precisely what is not wanted/needed by those operating the schemes.
One postulate is: the fraudulent schemes are deliberate. The true intent may not be known but can be guessed at, and such guesses tested by their fit to what data are known...and the the true picture may well emerge.
E.g.,Anglo-American bedfellows at TPTB levels are madd'ing clever at overcoming perceived obstacles.
Hey, doesn't this boil down to something pretty simple?
Didn't the MIT-types just realize:
"Hey, if we can colocate our servers, that's the last piece of the puzzle. We're smarter, faster and we do more volume. Therefore, we become the real NBBO and NBBO becomes, in effect, the secondary market."
"Sure, the volume is fake and the "trades" are mostly self-dealing. So what? It was ever thus. Now it's just a lot faster with a lot-smaller group at the top of the food chain. As long everybody keeps pretending the official market is the real market, we're money good. We provide them liquidity, they provide us a micro-arb."
They process quotes faster. They clear trades faster. They find prices faster. So, they run the market? Is there a problem here?
;-)
If you need a software development environment that will simulate and run your multi-core software faster than real time, upto the 1,000,000,000 instructions per second range with full multicore debug capabilities then you need to be using Open Virtual Platforms.
Oh, the horror.....
nice trade if u shorted it at 20. time to ring the register dewd because it won't last. u may want to check out a 2 year chart. if it hits 16 i load the truck. just sayin'
(Check the Date)
"Oh I get it. It's very clever...how's that going for you; being clever?"
-TD
I aint never buy'n none of that junk. It's a scam. Zombie Banksters should be shut down. What ever happen to King Dollar ? That stock market is a Bunch of BS. Stay away no 401k.
Meanwhile elsewhere in the city....
http://www.cnbc.com/id/39284554
Ex-Physicist Leading Inquiry Into Flash Crash
As a doctoral candidate in physics at Princeton two decades ago, Gregg E. Berman spent a year and a half in a laboratory searching through subatomic data for an elusive particle called the heavy neutrino.
Now, from his small office at the Securities and Exchange Commission here, the former physicist is busy completing a similarly painstaking task, supervising a team of more than 20 investigators who have spent the last five months scrutinizing reams of stock-trading data and hundreds of interview transcripts in an effort to figure out why stock prices went into free fall for 20 terrifying minutes on May 6.
Ex-physicist? Is that supposed to impress me? What if they'd said he was a hispanic aviator? Who cares?
I shall not hold my breath waiting for the "truth" to be fully disclosed...
the more scientific jargon they can fit into the credentials, the more they expect the sheeple to believe them ....when they say that the flash crash was nothing sinister....
"Was The April 28 Mini Flash Crash A Grand Rehearsal For The Real Deal A Week Later; If So, By Whom?"
It wasn't the President's 'Plunge Initiation Team', was it?
Oranges and lemons
Say the bells of St. Clements
I owe you five farthings
Say the bells of St. Martins
When will you pay me?
Say the bells at Old Bailey
When I grow rich
Say the bells at Shoreditch
When will that be?
Say the bells of Stepney
I'm sure I don't know
Says the great bell of Bow
Here comes a candle to light you to bed
Here comes a chopper to chop off your head
Chip chop chip chop the last mans' HEAD!
We already know that after TARP was rejected by COngress, the stock market was dropped 600 points or more before recovering to a 400 point loss. The PPT was basically "shut off" to show the world who Daddy was.
After the market scared the hell out of Congress, the coughed up the money. That was a Bernanke /Paulson hostage shooting.
Since then, with the retail player out of the stock market, the FED, Primaries and colluding Central Banks have even MORE control over the asset value of equities.
We all know that if price was allowed to go "native" most stocks would drop 50%-as we see with the mini-single stock crashes like Plantronics.
That would wipe out what's left of 401ks' and destroy asset-backed money supply.
When the flash crash occurred, Banking Reform was on the table I believe.
So that day, I assume the HFT owning dealers colluded and hammered the market to show who is Daddy.
As the retail player evacuates, the banks have HEISTED most of the equity shares and socked them away in State Street, Barclays, HSBC et al. while having a small supply liquid in the system.
The system bids the stocks up fractionally, and it looks normal-except for volume. They can't fake that yet.
The banks are not going to let the asset value fall unless they are in a panic or Congress is after them again. They will hold the stocks as high as possible until they sucker some longs in to take over ownership.
This is how the real estate market works.
The whole post crash era has been a taxpayer assisted heist of property and assets- we can thank Buffet for Benedict Arnolding too. He's a traitor and so is Bernanke and Geithner. The failing banks should have been shitcanned and nationalized. Now we have created a massive collusive monopoly that prints money, steals savings, sabotages other countries and basically screwed us for a century.
Additionally on April 28th the GS Execs were in front of Congress and Financial Regulation bill had just been blocked a second time by Senate Republicans.
The Bill seemed to get its footing and really get moving forward over the weekend following the May 6th Flash Crash.
The question is, how does one take advantage and make money in today's current conditions of manipulation? How do you get started in HFT?
Just sending up a test balloon, but it was May 7... the next day, when the senate backed off a full audit.
http://www.bloomberg.com/news/2010-05-07/sanders-drops-proposal-to-audit-federal-reserve-s-interest-rate-decisions.html
Tyler I truly hope at this point you agree with me that the Flash Crash was not a natural event and was artificial and created for the sole purpose of preventing a Full Fed Audit amendment vote and to derail the Brown/Kaufman amendment. This is precisely why the markets miraculously rose after Sanders agreed to the watered down amendment. There is no investigation needed we have had a financial Coup in this nation and much like Nicholas Biddle threatened Jackson with a depression by withdrawing liquidity and credit from the U.S. during the Bank Wars in the 1820's the Federal Reserve and Wall Street cosa nostra have used purchased politicians and threats to interfere with legislation. The Federal Reserve now has more power than the Executive branch. Does anyone else find it incredibly odd how the the "Vera Baker" story appeared for one day only with rumors of a video proving an affair during the President's Senate campaign. Furthermore this came directly after the President appeared to be testing the waters on advocating spin off of derivatives and Glass-Steagall. The story appeared on May 1 a mere 5 days before the flash crash. It also only appeared in the National Enquirer. It disappeared in one day when he fell back in line and has not surfaced since nor have any other media outlets attempted to bring the story back up.
Who owns the national Enquirer? Roger Altman of Wall Street. Here is an interesting fact.
"Roger C. Altman, Co-Chairman is on the list of attendees of the Bilderberg Conference, held June 3-6, 2010, at Luxury Hotel Dolce Sitges, south of Barcelona"
http://www.thehollywoodgossip.com/2010/05/barack-obama-vera-baker-affair...
It was either orchestrated by the primary dealers or the Fed as a weapon of financial terrorism. The market makers took away all the bids and showed just how artificial every stock price is in the market in order to highlight exactly how propped the entire market is and how at any moment they can destroy the economy. The same actions were done after the failed TARP bailout vote & threats of marshall law and used in March of 09' to induce more accomodations for the banks in terms of mark-to-market suspension. The Dow has never had a day like it experienced in a mere 15 minutes the likely hood of that occurring naturally when the markets have been on autopilot without any sign of a pullback on a day when the Federal Reserve and the banking cartel faced their most serious threat is an impossibility.
+100
Yep, audit the FED? That is the end of the predator's universe. Too many criminals worked too long to make that zombie golden goose and they ain't gonna let any stupid sheep get in the way of that un-dead theft machine! If your are going to kill that zombie, you will have to kill the zombie monopoly criminal governemnt at the same time, otherwise the surviving zombie will just raise the other from the dead no matter which one you down first. Those crime systems are a tag team.
meanwhile, .bin frontrunner poises his script, eager to launch.exe for the action of the 666 slice of the day.
But what do we do with the mentat martin says the fomc committee sparc. Not to worry, Black ICE covered that foray.
"I hereby assign to you the function of the President under section 13(b)(3)(A) of the Securities Exchange Act of 1934, as amended."
B9K9 & CD: I think both of you are on to something here. B9K9 if there are several groups out there to WIN as you assert; greed has no logical end so the game comes down to who is going to be the biggest fish that eats the lesser fish. The game.
CD, that premise above, if correct, validates you--this thing is absolutely intentional-- and if so lays out that the end result will be an enoromous crash and burn ending.
A bang; no wimper. Milestones
I felt is was intentional before it happened. Meaning that the 2008 crash was deliberate and intentional to serve higher purposes. It facilitated the bailout that keep the housing and Treasury fraud under wraps for many more moons.
So when the May 6th crash was happening, in real time, I was saying to myself that it was deliberate. I drove home that evening thinking about how to write the article and I wrote it the next day, Friday. It was published Sunday morning after proof reading.
Once one begins to look under the rug, one finds all kinds of dirt.
I too-- though the whole thing was half a step up from Vaudville, especially when Paulson came out with those 3 sheets of paper and TOLD the American people, bend over. I commented to others around me, including a couple of Traders: You seen a first, a Coup de E'dtat in broad daylight and everyone is so-gosh isn't it nice we can settle things like grown-up kinda vomit material.
If you still have a copy of that article, I'd love to read it. Milestones
http://www.zerohedge.com/article/call-%E2%80%93-fictional-look-25-minute-market-crash
B9K9 & CD: I think both of you are on to something here. B9K9 if there are several groups out there to WIN as you assert; greed has no logical end so the game comes down to who is going to be the biggest fish that eats the lesser fish. The game.
CD, that premise above, if correct, validates you--this thing is absolutely intentional-- and if so lays out that the end result will be an enoromous crash and burn ending.
A bang; no wimper. Milestones
B9K9 & CD: I think both of you are on to something here. B9K9 if there are several groups out there to WIN as you assert; greed has no logical end so the game comes down to who is going to be the biggest fish that eats the lesser fish. The game.
CD, that premise above, if correct, validates you--this thing is absolutely intentional-- and if so lays out that the end result will be an enoromous crash and burn ending.
A bang; no wimper. Milestones
I'm really sorry, but all that research is wrong. It was this chick and it's all her fault:
http://madscienceunlimited.com/fiction/theexchange.html
I'll tell her to knock it off.
Oops! I guess I gave the markets too much liquidity that day.
BennyBoy
Astonishing.
DavidC