It's Official: It's A Broken Market And "Hundreds Of Thousands" of Orders Affected

Tyler Durden's picture

It will not come as a surprise to too many Zero Hedge readers but we feel a big told-you-so dance coming on again.  Via BATS:

  • BZX Exchange (10/24/08 - 01/04/13) Average Daily Incidents: 410.1 Total Incidents: 433,039

In simple terms BATS admits that the Reg NMS trading principle of NBBO (National Best Bid or Offer) has failed; meaning the core premise of market structure since 2005 has been massively abused by at least one and likely all exchanges. The bottom-line is that the primary and really only safeguard in the market when HFT was unleashed was never operational and the SEC has had i) no actual supervision over who or what was abusing the NBBO and ii) no way of keeping track of what really happens in the market.




Dear Member,


Please be advised that BATS has determined that upon an NBBO update on BATS' BYX Exchange, BZX Exchange and BATS Options, there are certain cases where the Matching Engine will allow for a trade through or an execution of a short sale order at a price that is equal to or less than the NBB when a short sale circuit breaker is in effect under Regulation SHO. These cases result from the sequencing of certain required events in the Matching Engine related to re-pricing and sliding orders in response to the NBBO update.


In the first case, a visible order that is posted and has been price slid can execute at a price that trades through another market center's protected quote if that away market center locks the displayed price of the BATS order and then BATS receives another order that crosses the working price of the resting order.


In the second case, the system was programmed to allow non-displayed peg orders to re-price in response to a change in the NBBO prior to sliding previously booked contra-side hidden orders that now cross an away market center. As a result, it is possible that in response to a change in the NBBO, the price of a resting hidden order could be crossing the NBBO momentarily and an execution could occur at that crossing price against a peg order that is re-priced in response to the NBBO change, resulting in a trade through. This particular issue can also result in a short sale order executing at a price that is equal to or less than the NBB while a Regulation SHO circuit breaker is in effect.


These system compliance issues have resulted in the following incidents:


Trade Throughs




BATS Options

(02/26/10 - 01/04/13)
Average Daily Incidents: 1.4
Total Incidents: 617


BYX Exchange
(10/15/10 - 01/04/13)
Average Daily Incidents: 14.4
Total Incidents: 7,884


BZX Exchange
(10/24/08 - 01/04/13)
Average Daily Incidents: 410.1
Total Incidents: 433,039


Regulation SHO Incidents




BYX Exchange
(02/28/11 - 01/04/13)
Total Incidents: 174


BZX Exchange
(02/28/11 - 01/04/13)
Total Incidents: 3,489


BATS plans to deploy a permanent change to correct the second case on or about January 18, 2013 and the first case on or about January 25, 2013. Correction of the first case must be preceded by a rule filing with the SEC.


Please contact the BATS Trade Desk or your Director of Sales with any questions.


BATS Trade Desk

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kdrury12's picture

so they screwed up on say, 500,000 orders over the last 4 years. Over that time, they probably handled 100 billion orders, so the error rate is pretty small here

Never One Roach's picture

Corzine is sulking in the corner...depressed he was not chosen for secretary treasurer.

Michaelwiseguy's picture

I've been researching the 14th Amendment;

I don't think anybody is questioning the validity of the national debt however, I am questioning how and in what manner payment of the debt will be made.

We can make payment to the Federal Reserve for the portion of US Treasury Bonds they hold with a $1 Trillion Platinum coin/coins. That doesn't mean the platinum coin is redeemable in physical platinum either.

Section 4.

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any state shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

Dr. Sandi's picture

Why don't you get your own fucking blog so we can all ignore your constant thread hijacking completely.

Michaelwiseguy's picture

The virtually the last thread I commented on is now at the bottom of the ZH page, the gun thread.  Why don't you go to one of the previous 6 threads I wasn't on if you don't like it and shut the fuck up?

NoDebt's picture

Quick question:  Who do you blame for everything that doesn't work out in your life?  Clearly you would never see any fault in your own actions (ever, under any circumstances) so I'm really curious how a person like you justifies rude, immature, childish behavior like this.  I mean, you're not even TRYING to fit in.  Yet, I don't think you're a troll with an agenda.  Even trolls have an objective.  I really think you're foating through this with no clue whatsoever what you're doing or why.


Michaelwiseguy's picture

To answer your question, I usually try to make well thought out comments, many people hear find those comments informative, and I get vastly more up arrows then down.  justifies rude, immature, childish behavior like this, You get back from me the respect you give and vise versa, we call it fight club here at ZH, makes it a lot more lively around here. Things in my life are working out just fine so far, I'm concerned about going forward, that's the problem with my country. The only agenda I have is fixing my country, and I'm not nor do I require being paid for my work.

As far as my previous comment that garnered so much ire from a certain individual, I sometimes have thoughts like that and want to get them out before they pass into my memory hole. I should have waited to post that one for the next thread that popped up where it would have been more appropriate. 

PS, My most recent thought;

We need Defense Rifles like AR-15s to defend ourselves against the 1.8 billion hollow point bullet purchase made by the Federal Government through the TSA for the DHS.

Cathartes Aura's picture


I sometimes have thoughts like that and want to get them out before they pass into my memory hole.

as suggested, get your own blog.  you can store your fleeting thoughts, link your those "ideas" you're currently reading at the three internet-spaces you visit (your own admission), and offer up all the opinions you like.

all that is being suggested is you STOP using ZH as, stop with the OMG-threadjacks - which are daily.

come here and link your blog in-thread, like others do, fine, everyone then has the option to ignore or click forward - but stop acting like this is your homepage, it's hella annoying.

Manthong's picture

And in related news, lawyers for Amalgamated Belfry, Inc. have filed a class action suit alleging that multiple exchanges had full knowledge of  trading discrepancies regarding BATS in Belfry transactions.

Michaelwiseguy's picture

Sorry. I'll accomadate you for a few days coming up since I'm going to be doing some major work to my truck that will last a week or so. This gun battle distracted me., funny, more eyes on this #1 blog by far. I do think your comments are good though Cathartes Aura .

youngman's picture

I can just vision the Jury in that case......a bunch of unemployed minority sheeple who have no idea about´s ...or even the speed of light.....LOL.....

TruthInSunshine's picture

The markets are completely rigged, manipulated & broken, and set up to be a wash, rinse & flush operation to relieve the plebes of their wages/stawk "investments"/401(k)s/paper "wealth" at regular intervals, you say?

It's all a looped pump & dump Ponzi, you say?

Who-could've-known-this? Jeremy Siegel certainly either didn't know it, or if he did, hasn't been honest with his students, readers or general public, and I find that hard to believe, given Jeremy Siegel's unimpeachable ethics, morals and scruples. /sarc

Don't take on debt if you haven't yet. Get out of debt if you're in it. Learn valuable skills that society deems necessary and that few people can provide. Take real value in exchange for that which you provide. Invest the real value you receive in tangible things that aren't depreciating, needless, consumerist garbage "goods," and stay the hell away from rigged "investment" enterprises/Ponzi schemes.

Opt out of the pen leading to the slaughterhouse.

Oh regional Indian's picture

hmmmm...... a voice of intrusive but real inputs is hella(!!!!) annoying eh CA?


sad to read that coming from you, who has thread jacked many a thread for your feminist tirades....

Michael, FWIW, you rock. The world needs more strident truthers like you.


Cathartes Aura's picture

lol, well hello.

apparently a bit of unresolved emotion there OrI, if you're resorting to the "feminist" tag, as you know I don't refer to myself as "feminist" simply because labels require uniformity, and I don't do that - I think, and argue, for myself thanks.

all Michael was being asked to do is stop the top of the thread off topic-jacking - which apparently he was "taught" by you, according to posts a while back, so I suppose I understand your defending him.

also curious is your timing, last time you posted was two weeks ago, and yet here you are, defending your protégé?


laomei's picture

There are training requirements for servicemembers, and that's the standard ammunition they use as it has stopping power and does not overpenetrate.  If they wanted to kill you off, I'm very sorry, but they'll just drone strike you to death and there's nothing you can do about it.

NoControl's picture

I am but one android, with a single weapon. There are hundreds of Sheliak on the way; and their weapons are far more powerful. They may not offer you a target. They can obliterate you from orbit. You will die - never having seen the faces of your killers. The choice is yours.

uncle_vito's picture

Most all pistol ammo is hollow point.   Be worried when they buy the 5.56 which is for the M14.   Then they mean business.

Big Slick's picture

I took a corzine this morning.  First one in 3 days.  Felt GREAT after!

Its_the_economy_stupid's picture

Bathroom humor, while low-rent, is ALWAYS appreciated!

knukles's picture

"for services in suppressing insurrection or rebellion"

Michaelwiseguy's picture

I bet that clause was added by the Rothschilds banksters. That clause should be amended.

Silver Bug's picture

Wow what a shocker here! Anyone on Zero Hedge could of told you that for years! The market has turned into one massive ponzi scheme!

philipat's picture

Don;t bother the SEC with these details. Nanex can watch this stuff whilst the SEC pursues more important matters like watching porn.

macholatte's picture


Dear Tyler:


Please refrain from using old, twentieth century terms and upgrade to the new standards of the electronic age.

Henceforth, these terms should be used:

"Casino" replaces "Market" (market is like so gay)

"Gambler" replaces "Investor" (for clarity)

"Chips" replaces "stocks & bonds"

"Dealer" replaces "Broker"

"Mark" and "Chump" replaces "customer"


nope-1004's picture

You made an error.


"Muppet" replaces "customer".  So get with it, Muppitchez !!!!


Monedas's picture

"Hoarder" replaces "Stacker" ..... take back our language !

Go Tribe's picture

Who has an image of a bull getting ass-fucked?

brokenclock's picture

The rats are pointing fingers at the other rats.  Now is when everyone should start setting the microwave popcorn. lol 

It's game on.  They are going to push for the gun grab, ammo is  low or non existitant, ebt cards are shutting down for 24 hours, and NBBO is all bullshit.  Like anyone who sat infront of a terminal for 2 hours didn't know this.   This all can't be coincidence, can it?



espirit's picture

Only a coincidence in...


A)  a BANANAAA+ Republic

B)  Bizzarro World


D)  All of the Above. 

Dr. Sandi's picture


so they screwed up on say, 500,000 orders over the last 4 years. Over that time, they probably handled 100 billion orders, so the error rate is pretty small here

I think the point here is that the orders with errors are the ones that matter, since those are likely the ones that were nudged onto a siding for nefarious purposes.

francis_sawyer's picture

So the fuck what?...


You got jewed out a few more or less joobux here or there in a broken market...


Oh no wait... The market is controlled by 'Trekkies' & 'Birders' ~ Quick, let me reconsider & recalibrate...

Divine Wind's picture




Become Jewish, then study real hard, be a shrewd player and help your friends move up.

You can skip the Jewish part if you desire, but keep the other tenants and you will find the same success.

Then people can hate you.


Cap Matifou's picture

Jim Stone actually tried to become one, read on what happened


Banjo's picture

Yeah if you went shopping and they overcharged you at the counter no problem right. Especially when you think of the millions of items they scan and serve ever day.

Besides it will cancel out in the long run you know Im sure if you get over charged eventually you will make money and be under charged right!


centerline's picture

Just finding out after 4 years?  4 years of hiding it maybe?  You missed the point.  Something like this begs further questioning.  Your imagination can take it from here... maybe... just think evil.

Everyman's picture

Report information about this to the SEC Office of Insapector General.  They have to do an investiagation and reply with a Rep.s name.


THAT's how you fight these HFT assholez.

Sylvia Plath's picture

... and despite this obvious piece of news, I bet more than half the idiots that post on here are still trying to "trade" this market!

TWSceptic's picture

A manipulated market offers opportunities to profit from so the idiot is the one who ignores the opportunities.

ball-and-chain's picture

This market is set up for the big boys.

If you aren't a member of the club, get out.

Retail investors beware!

You will be fleeced.

TraderTimm's picture

Anyone who trades in these markets are aiding and abetting the current broken system by virtue of supplying it with volume.

If you have the balls, I suggest stopping. A million posts on the inequities of HFT won't do much - and I hate it as much as Tyler does.

Starve the fuckers, now.

Archduke's picture

perhaps. then again we don't know how crucial the missed trades were.

it's also interesting that it concentrates on BZX.  smells like willful abuse.


what I find astounding is that this took 4 years to discover?

nobody noticed that their orders were crossing the NBBO?


Arnold's picture

Perhaps Someone with integrity,obviously low in the ladder,

filed the report.

 I'm sure it is fixed.

insanelysane's picture

It's not and "error rate", it is a "manipulation rate".

Your logic is that if banks have 100 billion people go up to the tellers over 4 years, then 500,000 bank robbers is not a big deal.

Fukushima Sam's picture

Shocked, I tell you!

CPL's picture

I am Jack's complete lack of surprise.

knukles's picture

I am Jack's unsurprised 4 year prolapsed rectum.

CrimsonAvenger's picture

Rectum? Coulda killed him!