Why Does Someone Keep Losing Money On AAPL In The Last Second Of Trading?

Tyler Durden's picture

Via Nanex,

In the last second of trading on January 2, 2013, trades executed more than $3 above existing market prices in Apple Computer Corp (symbol AAPL). These trades were marked ISO, which means the trader submitting the orders wanted to execute at these higher prices. Why? Good question. This has happened before (as Nanex are so excellent at uncovering): see Apple and Google's Last Second.

1. AAPL - 1 second interval chart showing trades color coded by exchange.
Several ISO trades with much higher prices appear from BATS (pink) and NSX (gold) in the last second of trading.



2. AAPL - 50 millisecond interval chart showing trades color coded by exchange. Zooming in from Chart 1.

 



3. AAPL - 50 millisecond interval chart showing bids, asks and trades color coded by exchange.
The trades execute against existing offers. Coupled with the ISO condition indicates these were intentionally executed at prices significantly above market price.



4. AAPL - 5 millisecond interval chart showing trades color coded by exchange. Zooming in further.

 



Nanex Research

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Compwiz4u's picture

I've tried to do something similar to create a technical breakout, but they would not let me pay more than the going offer price.

Al Huxley's picture

That is because you're not part of the club.  Two sets of rules, one for the insiders and one for the hoi-poloi.  Now you know which group you're in.

BaggerDon's picture

Plunge Protection Team trying and trying to instill confidence, the harder they try the worse it gets....

Freddie's picture

Ding! Ding!

(Most likely) Winner Winner Chicken Dinner!  ;-)

M4570D0N's picture

I know its more common in commodities, but could it be something as simple as a broker or some other similar market participant that is intentionally taking a loss to provide the party on the other end of this trade with a better than market value on the trade in order to gain their business in furture trades?

Catequil's picture

Yes, it reminds me of the so-called AA (against actuals) transaction in commodities, which is normally executed within the day's range, but there is no problem for it to be agreed outside of it (sometimes significantly) and has to be agreed upon by both parties. When it is significantly outside of the day's it is normal the exchange to start asking questions and demand proof of legitimacy from both parties involved.

"market participant that is intentionally taking a loss to provide the party on the other end of this trade with a better than market value on the trade" - the party seemingly intentionally taking a loss, is not really taking a loss cause I am sure it has some OTC arrangments in the background it is supposed to recover the loss through .

It is just a gimmick used by someone low on collateral to reduce losses (or boost profits) artifitially by transferring the loss from his trading account to another somewhat not so visible (or with delayed visibility) account of his of course with the allowance of the counterparty.

knukles's picture

Someone wanted a trade at a price higher than the market for purposes of inflating a mark on an AAPL position.

ebworthen's picture

Tax deduction, gaming the system, probably CONgressional idiots or CALPERS or other pension funds.

netshort33's picture

FINRA, they're the problem in my opinion. 

superuser's picture

Just looking at the equity action may not tell the whole story--as you suggest, a stock like AAPL clearly impacts SPX, et al. But what about the action in its options at the same time? I'm no markets expert by any means...

Ham-bone's picture

This is the fraud you hope it isn't...this is the farce the you feared it is...this is...well, American propaganda promoting socialist ideology by demonizing the faux enemies of the government (Wall Street, bankers, elite) while simultaneously paying all benefits of the state to this elitist group at the expense of the national interest.

Manipuflation's picture
"Why Does Someone Keep Losing Money On AAPL In The Last Second Of Trading?"

Because it was legislated in the fiscal cliff bill somewhere?

ebworthen's picture

Ponzi!  Ponzi!  Ponzi!

(have I said that yet today?  Oh well)

GNWT's picture

As a 25 year vet of trading who made the 5th trade on the NQ first day, 

June 1, 1999 - duh, easy one...in fact you can see it if you are an astute

tape reader - intraday..

 

the algos are set to a level above or below the "fair" value...

when you print AAPL outside the spread, algos jump...you can see

it cleary when AAPL is moving and the NQ is reacting tick 

by tick...

 

so, when they print outside a real edge...

 

the prints outside at the close would cause the end of day push higher and the 

"real order" executed at a higher price in volume...

 

proof of the hypothesis is the volume, not the print, correct Tyler?

 

G

 

Stay liquid my friends

the_market's picture

Maybe they tried to knock out short mini futures on apple...

d_taco's picture

Oil jumped more than 2% in a couple of seconds on second christmas day just out of the blue when 70% of the traders where at home.

There was only a strange news item from the UEA about terorists. The same UEA that profit the most of the high oil price.

Imagine which parties make a lot of money by dumping a litle money in the oil paper market.  

 

 

 

Benjamin Glutton's picture
What Actually Happened During the Flash Crash By David Waggoner Jun 30, 2010 8:10 am A deep analysis of the May 6 flash crash, key players including Apple and the NYSE, and the many questions that followed.

What is interesting is that busts occurred in Apple at all given the size of its market cap. It's also interesting that the busts occurred at NYSE-ARCA.

The SEC-CFTC report highlighted ETFs as an area for further study because more ETFs had busted trades than other stocks during the flash crash. All ETFs trade on NYSE-ARCA.

Perhaps more ETFs were broken because they trade on NYSE-ARCA and not because they were ETFs.

Inter-Market Sweep Orders (ISO) were created as an exemption to the order protection rule of Regulation NMS. An ISO is a limit order that

1. is identified as an ISO when routed to a trading center and

2. simultaneously with the routing of the limit order, one or more additional limit orders are routed to execute against all better-priced protected quotations displayed by other trading centers up to their displayed size.

All orders must be identified as ISO orders available for immediate execution. The ISO exemption was adopted to allow institutional traders to forgo the best-price requirement in order to fill large orders. In practice there's no difference in the size of orders executed using ISO and non-ISO and use of the exemption has proliferated to be the primary order-flow method for market makers and many large trading institutions. In truth, it's a loophole that allows traders to use ISO to preference their order flow as a precision instrument allowing them to limit execution to a specified market center regardless of the National Best Bid Offer. In the fragmented market structure of today it's used by market makers for bid/ask spread arbitrage, precision order placement, and directing trades to exchanges where they're reimbursed for limit orders. But ISO trades can also be used for more nefarious predatory trading tactics such as combining ISO with short selling to suck liquidity out of an illiquid/troubled market or security, or fine-tuning an attack on a known weak hand or anticipated liquidation.

Both the NASDAQ and NASDAQ-BATS declared self-help against NYSE-ARCA in the minutes preceding the flash crash. Was that the equivalent of “blood in the water” alerting predators of weakness?
NYSE-ARCA held the National Best Bid Offer for Apple for 25% of all trades during the 10-minute period of the flash crash but was the source for 52% of crossed trades. 100% of Apple crossed trades executed on NYSE-ARCA were ISO-exempt trades. Actually, in minute 2:46, 100% of all Apple trades executed on NYSE-ARCA were ISO-exempt trades. Were they weak-seeking guided missiles or reimbursement-seeking liquidity providers?

Read more: http://www.minyanville.com/businessmarkets/articles/flash-crash-apple-cause-reasoning-wonderland/6/30/2010/id/28982#ixzz2GuLCtuT1
Racer's picture

Keep uncovering the fraud, ZH and Nanex,  we need you!

Downtoolong's picture

It could be tied into the daily settlement price of an OTC option or derivative which no one else sees. Take a modest loss on the stock and make a fortune on the derivative.

Any way you look at it, it's illegal. So the question shouldn't be why but how? Of course, to get an answer, the SEC must look, and that just ain't happening unless you or I did it.