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Will Taseko Mines' Flash Crash Let The Offending Algo Finally Be Punished?

Tyler Durden's picture





 

Anybody who was trading Taseko Mines (TGB) today, experienced a brief heart attack when the Canadian company lost nearly half its value around 2:33 pm Eastern time. In the blink of an eye, the stock price plunged from $7.20 to the mid $4 in what appeared to be another mini flash crash. Subsequently, it recovered, but only modestly, ending the day down about 10% from its open. What is odd is that not only did a circuitbreaker not get activated following the 40%+ drop, but that the exchanges have not cancelled any of the trades, meaning that whoever started the selling avalanche is going to be stuck with their $4.58 sales. And as the charts below show, quite a few shares traded at the new baseline. What is oddest, is that there was absolutely no news in the market to cause this move, and to the best of our knowledge there was no rumors circulating either. Mootley Fool reports: "President and CEO
Russell Hallbauer issued a statement saying that management "is unaware
of any information that would cause the price of the Company's stock to
change materially, as occurred on October 14, 2010." The stock had been trading up as much as 11% before the
drop, and had hit a 52-week high. The upward movement was largely
because of an upgrade from Jennings Capital analyst Peter Campbell.
According to The Globe and Mail, Jennings issued a research note that was bullish on copper prices and upped its price target on Taseko by 28% to $10." Could this be the first time when an inexplicable flash crash driven by some jittery algo will not result in the exchanges handing back the HFT's forfeited money right back to them? We hope going forward every since robotic instability is punsihed appropriately. To all those whose 30-40% OTM limit buys got triggered, congratulations. Once again, we suggest readers establish limit buy positions 40% away from NBBO in stocks and sectors of preference, as the next flash crash is usually just a millisecond away. If lucky, just like in TGB, your trades will stay good.

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Thu, 10/14/2010 - 17:23 | Link to Comment TraderTimm
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Would be nice to not have these trades busted. But, there I go trying to be all 'fair' and stuff.

Thu, 10/14/2010 - 19:50 | Link to Comment Mercury
Mercury's picture

SEC: Do over!

It will happen, it's the only tool in their utility belt.

Call me crazy but I wonder if this has anything to do with the Chilean mine collapse...a robo-headline reading mistake, mis-extrapolation of some tangential issue or something...

Thu, 10/14/2010 - 17:28 | Link to Comment putbuyer
putbuyer's picture

Is Yahoo down?

Thu, 10/14/2010 - 17:33 | Link to Comment living on the edge
living on the edge's picture

Yes

Thu, 10/14/2010 - 19:16 | Link to Comment Pondmaster
Pondmaster's picture

Not down - had to use several "back doors" to get into Yahoo finance, Mail . Finnalt made it 6p.m.

Thu, 10/14/2010 - 17:38 | Link to Comment goldmiddelfinger
goldmiddelfinger's picture

9 times average volume. I follow the name and bot some in the high 5s on the rebound. Touch my shares and I'll whack your baby ben.

Thu, 10/14/2010 - 17:33 | Link to Comment Bearster
Bearster's picture

Rhetorical question: if someone gets filled on a hedged trade, say long Taseko, short Freeport McMoran, and they bust the Taseko trade, do they also bust the Freeport McMoran trade?  Or is the hedger left naked?

If they want to go and bust trades, then that leads to further problems and no good choices.  They have no way of knowing what hedges people are putting on (long Taseko, short Taseko calls?  Long Taseko, short copper in London or copper futures on COMEX...???)

If hedgers are now exposed to a substantially greater risk due to arbitrary trade busting of one leg of their straddles, will this not reduce hedgers' participation in markets?

If so, then will this not result in a widening of all sorts of spreads?

Thu, 10/14/2010 - 17:38 | Link to Comment goldmiddelfinger
goldmiddelfinger's picture

What's widening is the scandal. BTW they dont give a rats about your hedge or even if you already flipped your cancelled side.

Thu, 10/14/2010 - 17:39 | Link to Comment living on the edge
living on the edge's picture

I've been following Taseko for some time now. It's a copper play soon to maybe being a gold play. I find this action very peculiar because of the sector. Someone got some cheap shares today.

Thu, 10/14/2010 - 17:39 | Link to Comment George Costanza
George Costanza's picture

anyone have a good link to appropriate regulators where ZH'ers can post a strong request that flash crashes like this NOT be undone.  

Restoring trust means these trades have to stick.

Folks who set up algos need to take on the risk of algo errors. Algo risk error should not be backstopped by the exchanges.

Fri, 10/15/2010 - 08:06 | Link to Comment sharkbait
sharkbait's picture

--

Folks who set up algos need to take on the risk of algo errors. Algo risk error should not be backstopped by the exchanges.

--

Amen brother!

Thu, 10/14/2010 - 17:51 | Link to Comment CitizenPete
CitizenPete's picture

As I spam posted earlier today: We are saved!  -- 

Les Français à la rescousse:

http://www.bloomberg.com/news/2010-10-12/high-frequency-trading-needs-more-oversight-eu-commissioner-barnier-says.html

Thu, 10/14/2010 - 18:07 | Link to Comment GoldmanSux
GoldmanSux's picture

This could be just a good old case of insider trading. Taskeo has an application before the province of British Columbia to expand a mine significantly. The enivornmentalists are vehemently opposed. Essentially the stock is going to rise or fall dramatically when this is announced. Perhaps someone knows already.

Thu, 10/14/2010 - 18:09 | Link to Comment max2205
max2205's picture

New porn site had SEC busy today. They are looking down their pants with that HIV scare in Calipornia

Thu, 10/14/2010 - 18:50 | Link to Comment Dangertime
Dangertime's picture

I bought a lot of OTM puts on it this morning.....I sure wish it took longer to collapse.  I had to settle for a much smaller gain than I hoped due to the strong rebound.

I closed out as soon as I saw the crash had occurred.  Too unstable for me.

Ha, maybe they'll even trace the crash back to me.  Wouldn't that be funny.

Thu, 10/14/2010 - 18:36 | Link to Comment max2205
max2205's picture

What a bunch of double sandards. APOL for example, opens AH -10% and no halt. Then opens this morning premarket -10%. No halt.

WTF I made a killing but this selective implementation of rules will kill the market and players (Again)

Thu, 10/14/2010 - 18:58 | Link to Comment mcarthur
mcarthur's picture

Talk about a trading strategy!  Short the stock, induce a flash crash then unwind the short during the market chaos phase after the fact.

Thu, 10/14/2010 - 22:05 | Link to Comment harveywalbinger
harveywalbinger's picture

Yeah, if one knows beforehand there's gonna be a precipitous drop & subsquent precipitous gain shortly thereafter, one might be able to take advantage of that sort of odd behavior...  if one were so inclined... (& lacking of ethics). 

Also note that these qwayzy, once in a generation events (that occur a couple times a week these days ), will have the added psyop benefit that eventually the lower strata of society will be convinced to stop using pesky stop loss measures... since its just those darn qwayzy HFT machines & thus, the price will always come back up in short order... Right? 

Just a "glitch in the system...  It's not like there's someone actually planning these unfortunate events.  That would be wrong.  And if there's anything our fellow market participants and regulators are against, it's wrong. 

Thu, 10/14/2010 - 19:11 | Link to Comment Conrad Murray
Conrad Murray's picture

Does anyone know if there is a list of all the flash crashes and dashes somewhere out here in the intertubes?

Thu, 10/14/2010 - 19:56 | Link to Comment Bruce Krasting
Bruce Krasting's picture

Should be good for at least another four weeks of equity outflows........

Thu, 10/14/2010 - 20:58 | Link to Comment Artful Dodger
Artful Dodger's picture

Blaming this on an algo is highly presumptious, though apparently the "in thing". It traded 10 times normal volume on Amex and TSX (surprise, it trades in Canada, 1 day chart: http://www.google.com/finance?chdnp=0&chdd=0&chds=1&chdv=1&chvs=Logarith... ).

You don't see such volume differentials in other cases posted here. Least likely candidate for a "flash crash" to be posted on ZH yet. Someone wanted out (perhaps amplified by algos, as is everything).

Thu, 10/14/2010 - 23:49 | Link to Comment GoinFawr
GoinFawr's picture

Sheet, good eye there Art. I hadn't noticed that. I got all swept away myself...Amending comments accordingly. Thanks for keepin' it honest; Tyler?

Thu, 10/14/2010 - 23:52 | Link to Comment arthur darrell
arthur darrell's picture

Dodger You skirt the issue ya big pussy and facts are facts, people got SCREWED

Fri, 10/15/2010 - 02:07 | Link to Comment GoinFawr
GoinFawr's picture

It's a valid point though ArtyD. People got screwed, no doubt; there needs to be some delving, definitely.

Coincidentally, 'ArtyD' is a good nickname for either of you... You sisters or some'at?

Thu, 10/14/2010 - 21:11 | Link to Comment Jim in MN
Jim in MN's picture

Maybe the exchanges should cancel a random number of trades and revalue a random number of other trades to random prices.

HFT that.  Couldn't hurt human marks any more than the current free-fire zone.

Thu, 10/14/2010 - 21:12 | Link to Comment msjimmied
msjimmied's picture

Over 200k shares traded after hours, up near 60c or so.

Thu, 10/14/2010 - 21:12 | Link to Comment Hot Shakedown
Hot Shakedown's picture

CFD (Nuveen Diversified Commodities Fund) had a "flash " to the upside yesterday..

Thu, 10/14/2010 - 21:31 | Link to Comment Godisanhftbot
Godisanhftbot's picture

 This kind of nonsense has been happening for many many years, long before the 'flash crash craze'  Rarely got any press.

 

 And aren't we entitled to a full investigation, to determine that this is NOT a manipulation for the purpose of setting off stops and robbing the public blind?

 

 This is why the SEC is there, to make sure criminals don't get away with scams. Chances are not one regulator will ever comment on this event . 

 

 

 

 

Thu, 10/14/2010 - 22:09 | Link to Comment harveywalbinger
harveywalbinger's picture

Obviously you are paranoid and must hate America.  And probably a racist...

 

/sarcasm

Thu, 10/14/2010 - 22:52 | Link to Comment MountainHawk
MountainHawk's picture

I use to own TGB last year, wish I still had it until today!

Thu, 10/14/2010 - 23:50 | Link to Comment GoinFawr
GoinFawr's picture

<Deleted>

FYI: Taseko's proposed 'Prosperity' mine is sitting on a mountainous reserve of gold/copper (albeit not the highest grades by my estimation) and the provincial gov't is all 'git 'er done', but they haven't quite managed to appease the first nations whose land this is all on, and whose freshwater lake they will be, uh, annihilating.

How does that saying go again,

"When coyote talks, the people are forced to take a walk..."? Just askin'.

Deepest Sympathies Teztan Biny

Thu, 10/14/2010 - 23:52 | Link to Comment trav7777
trav7777's picture

Tyler, cut the bullshit.

It's time for you to stop pointing the finger at irrelevant parties and start placing the blame SQUARELY where it lies:  with WADDELL & REED.

Fri, 10/15/2010 - 00:37 | Link to Comment DonutBoy
DonutBoy's picture

This is all so pointless.  Why make the SEC clean up the trades that are out-of-bounds after the fact?  If they would just publish the daily price for each security first thing in the morning, we could save all the bandwidth of having quotes stuffed in at 5,000 Hz.

 

Wed, 11/03/2010 - 08:13 | Link to Comment drswhaley
drswhaley's picture

This was just a trial run for the news events of today that have shares down in PM by ~ 29% this morning.

 

http://finance.yahoo.com/news/Taseko-Mines-Responds-to-the-prnews-367179...

 

There is nothing like prosperity in the morning.

Tue, 11/16/2010 - 10:32 | Link to Comment daniel
daniel's picture

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