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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

 

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Thu, 12/13/2012 - 12:13 | 3059603 Martdin
Martdin's picture

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

Thu, 12/13/2012 - 12:26 | 3059688 NotApplicable
NotApplicable's picture

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

Thu, 12/13/2012 - 12:28 | 3059694 hedgeless_horseman
hedgeless_horseman's picture

 

 

When selling is outlawed, only outlaws can sell.

Thu, 12/13/2012 - 13:16 | 3059911 max2205
max2205's picture

What's a few ms between friends

Thu, 12/13/2012 - 13:19 | 3059922 resurger
resurger's picture

 keep it friendly...

Thu, 12/13/2012 - 12:29 | 3059696 Comay Mierda
Comay Mierda's picture

"market"... lol

Thu, 12/13/2012 - 12:42 | 3059764 unrulian
unrulian's picture

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

Thu, 12/13/2012 - 12:31 | 3059709 resurger
resurger's picture

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

Thu, 12/13/2012 - 15:51 | 3060530 Metalredneck
Metalredneck's picture

Cyber turrrurrusm.

Thu, 12/13/2012 - 12:31 | 3059718 Fire Cat
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!

Thu, 12/13/2012 - 12:43 | 3059765 hedgeless_horseman
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!

Thu, 12/13/2012 - 12:49 | 3059801 Fire Cat
Fire Cat's picture

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

Thu, 12/13/2012 - 12:53 | 3059825 Spastica Rex
Spastica Rex's picture

It's not like you're new here.

Thu, 12/13/2012 - 14:13 | 3060056 Fire Cat
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.

Thu, 12/13/2012 - 15:18 | 3060382 Spastica Rex
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.

Thu, 12/13/2012 - 16:18 | 3060640 Fire Cat
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!

Thu, 12/13/2012 - 16:00 | 3060568 Matt
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.

Thu, 12/13/2012 - 12:54 | 3059831 francis_sawyer
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...

Thu, 12/13/2012 - 13:42 | 3060006 Fire Cat
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.

Thu, 12/13/2012 - 12:55 | 3059833 EscapeKey
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.

Thu, 12/13/2012 - 14:48 | 3060223 Fire Cat
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...

Thu, 12/13/2012 - 13:01 | 3059839 hedgeless_horseman
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.

Thu, 12/13/2012 - 13:01 | 3059856 Stares straight...
Stares straight ahead's picture

Your damn squirrels have ivory tusks?

Thu, 12/13/2012 - 13:06 | 3059870 hedgeless_horseman
hedgeless_horseman's picture

 

 

Taste like rabbit.

Thu, 12/13/2012 - 13:11 | 3059884 Stares straight...
Stares straight ahead's picture

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

Mmm Mmm!

; )

Thu, 12/13/2012 - 13:48 | 3060025 Double.Eagle.Gold
Double.Eagle.Gold's picture

...tungsten filled rabbit

Thu, 12/13/2012 - 14:25 | 3060139 TuPhat
TuPhat's picture

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

Thu, 12/13/2012 - 13:07 | 3059876 Fire Cat
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.

Thu, 12/13/2012 - 13:27 | 3059936 buzzsaw99
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-...

Thu, 12/13/2012 - 13:39 | 3059995 Fire Cat
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?

Thu, 12/13/2012 - 13:51 | 3060038 Double.Eagle.Gold
Double.Eagle.Gold's picture

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

who's john galt

Thu, 12/13/2012 - 15:19 | 3060383 GMadScientist
GMadScientist's picture

e coli

my john galt

Thu, 12/13/2012 - 13:57 | 3060048 buzzsaw99
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.

Thu, 12/13/2012 - 14:06 | 3060086 Fire Cat
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.

Thu, 12/13/2012 - 13:10 | 3059883 Fire Cat
Fire Cat's picture

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

Thu, 12/13/2012 - 12:49 | 3059802 Stares straight...
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.

Thu, 12/13/2012 - 12:55 | 3059836 Fire Cat
Fire Cat's picture

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

Thu, 12/13/2012 - 14:00 | 3060072 Texas Ginslinger
Texas Ginslinger's picture

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

No apology needed.

Thu, 12/13/2012 - 14:21 | 3060128 Fire Cat
Fire Cat's picture

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

Thu, 12/13/2012 - 14:20 | 3060126 lincolnsteffens
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

Thu, 12/13/2012 - 14:39 | 3060190 Fire Cat
Fire Cat's picture

Thanks, lincoln. =)

Thu, 12/13/2012 - 19:27 | 3061153 GCT
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.

Thu, 12/13/2012 - 18:37 | 3061049 AurorusBorealus
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).

Thu, 12/13/2012 - 13:27 | 3059951 Rathmullan
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?

Thu, 12/13/2012 - 16:49 | 3060771 brokenclock
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) 

 

Thu, 12/13/2012 - 12:13 | 3059604 Madcow
Madcow's picture

Behold the Department of Profitability.

Thu, 12/13/2012 - 12:14 | 3059618 EscapeKey
EscapeKey's picture

Digital thieves setting off stop losses.

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

Thu, 12/13/2012 - 12:15 | 3059626 otto skorzeny
otto skorzeny's picture

Live Action!!!

Thu, 12/13/2012 - 12:52 | 3059821 catacl1sm
catacl1sm's picture

Love that show. YE-YE-YAW!

Thu, 12/13/2012 - 12:16 | 3059629 saturn
saturn's picture

F*cking Hell!

Thu, 12/13/2012 - 12:15 | 3059632 Tsar Pointless
Tsar Pointless's picture

Can HFT computers get cases of hiccups?

Maybe that's what happened.

Thu, 12/13/2012 - 12:16 | 3059635 Dr. Engali
Dr. Engali's picture

You didn't want those shares anyway.

Thu, 12/13/2012 - 13:54 | 3060047 Double.Eagle.Gold
Double.Eagle.Gold's picture

you didn't make those shares, .gov did

Thu, 12/13/2012 - 12:17 | 3059640 fonzannoon
fonzannoon's picture

practice run.

Thu, 12/13/2012 - 12:23 | 3059671 Dr. Engali
Dr. Engali's picture

This is what the end will look like. One morning we will come in and the whole market will be worth zero. Kind of like when BATS tried to go public. No bid.

Thu, 12/13/2012 - 12:25 | 3059684 saturn
saturn's picture

But they will not let you know which day it will be.. and the consequent volatility will be likely totally uintradable..

Thu, 12/13/2012 - 12:33 | 3059712 hedgeless_horseman
hedgeless_horseman's picture

 

 

practice run!

Thu, 12/13/2012 - 12:35 | 3059741 GolfHatesMe
GolfHatesMe's picture

It will be the day that we see 535 new short position accounts established and not before

Thu, 12/13/2012 - 12:45 | 3059787 hedgeless_horseman
hedgeless_horseman's picture

 

 

They don't need to be short, just liquid.  That was how generational wealth was made in each of the last crashes.

Thu, 12/13/2012 - 12:23 | 3059673 Madcow
Madcow's picture

IMF's Lagarde says she does not see hard landing in China

It is difficult to get a man to understand something when his job depends on not understanding it.
Upton Sinclair

Thu, 12/13/2012 - 12:24 | 3059676 Boxed Merlot
Boxed Merlot's picture

It's the fat lady clearing her throat.

Thu, 12/13/2012 - 12:52 | 3059816 forwardho
forwardho's picture

The fat lady has been belting it out for so long she has blood shooting out of her throat.

Alas, the ears of the market have been filled and packed with cotton.

Thu, 12/13/2012 - 12:24 | 3059677 Cunnial
Cunnial's picture

It looks like that Snake game you got on the old Nokia (Who?)....

Thu, 12/13/2012 - 12:24 | 3059678 youngman
youngman's picture

this just makes you sick to your stomach to see this theft...and the so called controlling agencies approving of it...its theft...

Thu, 12/13/2012 - 12:25 | 3059681 resurger
resurger's picture

 

Gone in 45 MS

This is how we leverage to 44 Trillion when we have 100bn in assets.

Speed son, Speed .. you got that?!

Regards,

LB

Thu, 12/13/2012 - 13:02 | 3059859 Withdrawn Sanction
Withdrawn Sanction's picture

It's interesting that in all this "fiscal cliff" nonsense, there's no talk of raising taxes from the financial sector.  The biggest freeloaders get the biggest free rides.  For example, a small one cent per-share-per-order transaction tax ought to help the HFT thieves actually contribute to society for once. 

Yes, yes, I know...but one can dream, right?

Thu, 12/13/2012 - 13:17 | 3059913 resurger
resurger's picture

there was a time when good banks used to finance real business and growth and take share of their profits, but now it's all for me and for me only. in matter of fact, TBTF banks they dont even need to generate business, they can make money on Moral Hazard, and what other environemnt is better than ZIRP.

You are right, people will wake up one day when harsh reality kicks in and fix this mess.

Thu, 12/13/2012 - 12:30 | 3059708 swissaustrian
swissaustrian's picture

I wanna merge with robots - Ray Kurzweil

At least they can make money.

Thu, 12/13/2012 - 12:31 | 3059711 Lost Wages
Lost Wages's picture

I tried to get in on that 30ms drop, but I couldn't click my mouse fast enough.

Thu, 12/13/2012 - 12:31 | 3059723 adr
adr's picture

Forget about moving the mouse, even the latency of the click through the USB port is longer than 30ms.

Thu, 12/13/2012 - 12:31 | 3059713 adr
adr's picture

The truth of what the stocks are really worth came out for a couple milliseconds. But alas the truth was covered up a millisecond later.

HPQ is worth less than $3. How it trades anywhere above $1 astounds me. Same with JCP and just about every other bullshit CFO cooked and channel stuffed stock out there.

Thu, 12/13/2012 - 12:31 | 3059716 boogerbently
boogerbently's picture

Never,

Never, never, never, never, never.......

use stop/loss.

 

Thu, 12/13/2012 - 12:32 | 3059721 fijisailor
fijisailor's picture

OK anonymous or anyone.  Time to infect these computers with a virus that prevents them from buying on the dip.  Lock in the losses.

Thu, 12/13/2012 - 12:41 | 3059777 LFMayor
LFMayor's picture

LOL!  Now that has merit man!

Thu, 12/13/2012 - 12:40 | 3059767 ptoemmes
ptoemmes's picture

FlashCrashes4EVA

Thu, 12/13/2012 - 12:49 | 3059805 AndrewJackson
AndrewJackson's picture

So if you had a limit order gtc in at those levels, would you have gotten filled? Might be a good strategy to put crazy limit orders in on large cap stocks and just wait for the flash crashes.

Thu, 12/13/2012 - 16:15 | 3060626 Matt
Matt's picture

No.

Thu, 12/13/2012 - 12:49 | 3059807 CrimsonAvenger
CrimsonAvenger's picture

It's ok, that was just when Kevin spilled coffee in his lap.

Thu, 12/13/2012 - 12:57 | 3059840 XitSam
XitSam's picture

There is a new movie coming out with Johny Depp having his mind transferred to a computer. (Title?) Wonder if he will do any HFT?

Thu, 12/13/2012 - 13:01 | 3059855 ak_khanna
ak_khanna's picture

The stock, commodity and currency exchanges have been reduced to gambling dens whereby the more powerful traders with deep pockets move the markets to maximize their own profits at the expense of the remaining not so powerful players. The big boys have enormous money power to move the markets in the direction which results in maximum profits for themselves. They effectively use the media to lure the other players in the market to a position where they would incur maximum loss.
The markets will fall only when the banksters have eliminated all the short positions and only they themselves have positioned themselves to profit when the market falls
OR
When an unexpected world event catches the banksters with their pants down and the softwares they use to rig the markets go berserk beyond their control.

http://www.marketoracle.co.uk/Article35345.html

Thu, 12/13/2012 - 13:54 | 3060050 BalanceOrBust
BalanceOrBust's picture

Algos are the reason I avoid stop loss orders and unmonitored limit orders.  I use limits only to prevent being abused by my broker and I avoid any sort of long-term standing order.  The only way to monitor a portfolio is to monitor a portfolio.

Thu, 12/13/2012 - 14:00 | 3060073 Radical Marijuana
Radical Marijuana's picture

In the face of this avalanche of abstract absurdities, most of the comments here just hone their macabre sense of humour.  ... What else can any of us do, but develop the ability to laugh at automated evil, running out of control at near the speed of light?

Thu, 12/13/2012 - 16:09 | 3060602 samsara
samsara's picture

Again, this feels like system component testing in the live envronment.

Test each individual component, and then different levels of integrate tests.

When they fire off the whole system, everything will disappear in ms's .

It will be a sight to behold.

Think like a systems programmer, along with the cliche of 'First time may be an accident, second time ...... etc'

Thu, 12/13/2012 - 17:31 | 3060913 Pairadimes
Pairadimes's picture

For a brief instant, EPS looked better on some of these dogs. Maybe the algos get sentimental for the fundamentals from time to time.

Do NOT follow this link or you will be banned from the site!