Broken Market Chronicles Part X+1: This Morning's Multi-Symbolic Flash Crash

Tyler Durden's picture

'Twas the seconds before the open, and all through the market, not a trader was stirring... well apart from Johnny 5 and his algo friends. From our friends at Nanex, in case you missed it, there were numerous algo-inspired flash-crashes this morning right before the open... HPQ (traded down to $3 from $14 in about 100ms), S (from $5.50 to $2.75 in 150ms), GS (from $117 to $94 in 45ms) and C (from $36.00 to $20.00 in 90ms) are among the NOT fat-finger moves we saw as the charts below show. Now move along and BTFD! Bernanke has told you so...

Via Nanex:

HPQ - All quotes and trades

HPQ - Only NASDAQ quotes and trades

S - All quotes and trades

S - Only NASDAQ quotes and trades

C - All quotes and trades

C - Only NASDAQ quotes and trades

WU - All quotes and trades

WU - Only NASDAQ quotes and trades

KR - All quotes and trades

KR - Only NASDAQ quotes and trades

WFC - All quotes and trades

WFC - Only NASDAQ quotes and trades

GS - All quotes and trades

GS - Only NASDAQ quotes and trades

T - All quotes and trades

T - Only NASDAQ quotes and trades

How to read this chart

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Martdin's picture

But but but... They bring liquidity... :(

NotApplicable's picture

Honestly, Nanex is going to kill off the market with these confidence destroying observations.

hedgeless_horseman's picture

 

 

When selling is outlawed, only outlaws can sell.

max2205's picture

What's a few ms between friends

unrulian's picture

if a tree fell in the market, would anyone hear it?

resurger's picture

Nanex! Hmmm..They work for Al-Qaida right?

Fire Cat's picture

Honest question: If you were working a bid ~50% off the book and the computers pulled the magical fuckjob (read market-making move)... Would you be filled? And, if you were filled, would they kill that order? I've never heard of trades being cancelled on account of anything but a human-based "fat-finger" trade. Anyone with experience on this? Thanks!

hedgeless_horseman's picture

 

 

Honest question: If you were hitting on a Victoria's Secret model at the Caribou Club and she was so fucked up she didn't know her name (read lsd-laced coke)... Would you take the shot? And, if you were fulfilled, could the cops arrest you for rape? I've never heard of rape charges on account of anything but a statutory-rape "robbing-the-cradler" conviction. Anyone with experience on this? Thanks!

Fire Cat's picture

That's a cute analogy, but it still didn't answer my question. Thanks, though, you're witty and fun!

Spastica Rex's picture

It's not like you're new here.

Fire Cat's picture

Correct, Spastica, but I've been following ZH for many years. More years than my membership information indicates. I've just never felt I had the balls to say anything. I just chose to keep learning at ZH. Thanks for helping me learn.

Spastica Rex's picture

Actually, I wasn't trying to be a dick - and I can see from your profile that you're not newbie. I was just riffing off your request to get an honest response.

Usually, when I prepend a comment with "I have an honest question," I rarely get what I'm looking for. And I'm not hating on HH, either, I just think the reply was caustic and sardonic, In the best ZH way.

Fire Cat's picture

Point and instruction taken. Thanks, Spastica, I would love to be a part of the ZH community. I'm just still learning. Maybe I'm a little too sensitive right now, so I'll mete my comments from here on out. Thanks again, I'm just happy to engage with the brilliant minds of ZH!

Matt's picture

If the price is too outrageous, they can have a do-over where all trades executed outside a certain range - say 20% or so - are reveresed. So even if the algos let your $3 HPQ bid go through (they wouldn't, as long as your bid was there, they would bid $3.005 and take it) then the market would probably have a do-over, give you back your money and give the shares back to the bot that mistakenly sold you the stock too cheaply.

francis_sawyer's picture

Anyone who believes in this market should spend time on BEEZID.COM putting on penny bids in an attempt to get $1.98 I-Phones... If you get bored with that you could always try to win a teddy bear on one of those claw machines at the arcade...

Fire Cat's picture

I once helped to free a child's arm from one of those claw machines. Little bastard didn't want to earn it. Likely he'll vote Obama in the next election.

EscapeKey's picture

Pre-flash crash days, a friend had (highly profitable) trades unwound due to what the broker called "erroneous pricing" (despite it wasn't). He called them out on it, and they pretty much just said they can do whatever they want, according to the 2,614 page "contract" he signed.

Fire Cat's picture

Sorry to hear of your friend's misfortune. That's just a joke in and of itself. But the banks run everything (P.S. When the *uck did that happen!?!?!), and they can do whatever the government allows. I think I just puked in my mouth thinking about it...

hedgeless_horseman's picture

 

 

My point is this.  Anybody working a bid 50% below market on any of these stocks is just hoping to get lucky when they could be making real money if they would just stay in their element. Stop wasting time fanatasizing about whether or not you can keep the ivory if you kill an elephant in Africa one day, and just go shoot the damn squirrels in your front yard.

Stares straight ahead's picture

Your damn squirrels have ivory tusks?

Stares straight ahead's picture

...rabbit sprayed with just a little Tomcat urine. 

Mmm Mmm!

; )

TuPhat's picture

I envy anyone who can shoot squirrels in their front yard.  That would be illegal where I live.

Fire Cat's picture

Obviously I have no illusions of working a bid as described. It was obviously an ignorant question, nothing more. Sorry for wasting everyone's time. And no, I'm not new to ZH, but I'm new to posting (ironically, I think I now know why), but I figured there was a plethora of people here much more learned and smarter than I who I might learn something from. Thanks for the lesson.

buzzsaw99's picture

if you are trying that use 29% below the latest trade because they generally bust flash crash trades below -30% in favor of the algos.

http://www.zerohedge.com/news/nyse-cancel-trades-beyond-30-band-opening-...

Fire Cat's picture

Thanks buzz. I guess I'm really just curious as to who benefits, if anyone, to these micro-crashes??? Yes, they're documented on the chart. But if the computers turn on each other, who actually wins? Obviously *someone* must, if they keep the algo charade going day-in and day-out. Or are the TBTF's just as ignorant as I am?

Double.Eagle.Gold's picture

who wins when a fart is loosed in a whore house?

who's john galt

buzzsaw99's picture

HFTs make money front running and quote stuffing they don't want to actually own anything. Therefore they run away from a real offer to sell like a scalded cat causing flash crashes. That is the inside joke about waddell & reed that still gets yucks around here. All big sell orders should proceed to the dark pools where actual prices paid are not reported.

Fire Cat's picture

Thanks again buzz, I'm glad to know there are a few people out there who will encourage and respond to the questions of an ignoramus. I have the same investing mentality (albeit a smaller bankroll) as those who are frequent posters on ZH, so please simply consider me a kindred spirit with a witty spirit and a penchant for learning as much as I can! I appreciate your candor and guidance.

Fire Cat's picture

But if I shoot the squirrels my hounds will have nothing to chase.

Stares straight ahead's picture

I have seen an order NOT executed during one of these crashes.  Since noticing this,  I feel like the ordinary retail trader/small investor does not have the technology required to get the trade executed in these small time periods.

The SEC has clawed back executed trades discounted over 30% during the big flash crash months (maybe a year?) ago.

Fire Cat's picture

Thanks, Stares, that answers my question. I appreciate it. And I apologize to everyone for my apparent ignorance. Much obliged.

Texas Ginslinger's picture

Every question here is a good one.  I was actually thinking the same thing, which you asked.

No apology needed.

Fire Cat's picture

Thanks, Tex, glad to know there are others out there seeking more answers!

lincolnsteffens's picture

Don't apologize here. Just because fuckers on this site spend 20 hrs. a day in or on the markets doesn't mean they are any smarter than you are. They just know more about one area than most. Just like ego maniacs who think anyone that knows less than they do or has less toys are idiots doesn't mean they aren't.

 

Keep on

GCT's picture

Fire Cat nice to meet you.  I like you read this site for a long time then registered.  I track trends and you will find some good people here.  Yes we do have our crazy folks as well.  I was actually scared to ask my first question here. 

I an not a professional investor but I do like my gold. Scared of silver and currently sitting on cash and gold I bought for 250 back in the day.  I come here every day.  ZH does indeed post some great articles.  Some of the stuff discussed here baffles me at times.  But what the heck I am 65 and survived a war.  The nuts and carzy folks here have nothing on bullets so I tread out and ask stupid stuff from time to time.  I love to crunch some numbers.

These nuts here cannot hurt you keep on asking them as I learn from your question.

AurorusBorealus's picture

Lincoln, I read zerohedge every day, and I don't have 1 penny invested in any market: stocks, bonds, nothing.  I suspect many zerohedge readers have similar positions (many here hold gold and silver and do not trust the marktes).

Rathmullan's picture

And in this utopian market we're conditioned to ask: what error caused the flash crash?

Never: what caused the market (or stock) to recover?

brokenclock's picture

Fire Cat,

Here is your answer.  Yes, It happens almost everyday, called a broken trade  or clearly erroneous trade. 

11890. Clearly Erroneous Transactions

The provisions of paragraphs (C), (c)(1), (b)(i), and (b)(ii) of this Rule, as amended on September 10, 2010, shall be in effect during a pilot period set to end on February 4, 2013. If the pilot is not either extended or approved permanent by February 4, 2013, the prior versions of paragraphs (C), (c)(1), and (b) shall be in effect.

(a) Authority to Review Transactions Pursuant to Complaint of Market Participant

(1) Definition.

For purposes of this rule, the terms of a transaction executed on Nasdaq are "clearly erroneous" when there is an obvious error in any term, such as price, number of shares or other unit of trading, or identification of the security. A transaction made in clearly erroneous error and cancelled by both parties or determined by Nasdaq to be clearly erroneous will be removed from the consolidated tape.

(2) Requests and Timing of Review.

A member that receives an execution on an order that was submitted erroneously to Nasdaq for its own or customer account may request that Nasdaq review the transaction under this rule. An official of Nasdaq shall review the transaction under dispute and determine whether it is clearly erroneous, with a view toward maintaining a fair and orderly market and the protection of investors and the public interest. Such requests for review shall be made in writing via electronic complaint or other means specified from time to time by Nasdaq as announced in a Notice to Members or Head Trader Alert. A request for review shall include information concerning the time of the transaction(s), security symbol(s), number of shares, price(s), side (bought or sold), and factual basis for believing that the trade is clearly erroneous. Upon receipt of a timely filed request that satisfies the Numerical Guidelines set forth in paragraph (a)(2)(C) the counterparty to the trade shall be notified by Nasdaq as soon as practicable, but generally within 30 minutes. A Nasdaq official may request additional supporting written information to aid in the resolution of the matter. If requested, each party to the transaction shall provide, within 30 minutes of the request, any supporting written information. Either party to the disputed trade may request the supporting written information provided by the other party on the matter.

(A) Filing Time Periods

(i) Except as provided in paragraph (a)(2)(A)(ii) and (a)(2)(A)(iii), any member or person associated with a member that seeks to have a transaction reviewed pursuant to paragraph (a) hereof shall submit a written complaint to Nasdaq MarketWatch within 30 minutes of the execution time.

(ii) Routed executions to other market centers will generally have an additional 30 minutes from receipt of their participant's timely filing, but no longer than 60 minutes from the time of the execution at issue, to file with Nasdaq for review of transactions routed to Nasdaq from that market center and executed on Nasdaq.

 

NASDAQ OMX does not normally break trades that are between the Reference Price and up to but not including the Numerical Threshold. Refer to the chart below for more details:

Reference Price, Circumstance or Product Regular Trading Hours Numerical Guidelines (Subject transaction's % difference from the Reference Price): Pre-Opening and After Hours Trading Session Numerical Guidelines (Subject transaction's % difference from the Reference Price):   Greater than $0.00 up to and including $25.00 10% 20% Greater than $25.00 up to and including $50.00 5% 10% Greater than $50.00 3% 6% Multi- Stock Event - Filings involving five or more, but less than twenty, securities whose executions occurred within a period of five minutes or less 10% 10% Multi-Stock Event - Filings involving twenty or more securities whose executions occurred within a period of five minutes or less 30%, subject to the terms of below 30%, subject to the terms of below Leveraged ETF/ETN securities Regular Trading Hours Numerical Guidelines multiplied by the leverage multiplier (ie. 2x) Regular Trading Hours Numerical Guidelines multiplied by the leverage multiplier (ie. 2x) 

 

Madcow's picture

Behold the Department of Profitability.

EscapeKey's picture

Digital thieves setting off stop losses.

No doubt the TBTF's will have their shares "erroneously sold" back.