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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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Thu, 01/10/2013 - 00:08 | 3139685 Yen Cross
Yen Cross's picture

 Have at it Billy-7. You have the gift of " artistic-realization"

Thu, 01/10/2013 - 00:06 | 3139680 Say What Again
Say What Again's picture

Well, the "market" really "likes" this news.  At 11:00 p.m. EST, ES is ready to break-out into new highs. 

Does any of this make any sense?


Thu, 01/10/2013 - 00:11 | 3139695 Yen Cross
Yen Cross's picture

 For any Asia traders/ It's CYN not CNY.  It's also Yuan not Reminbi/ Bitchez

Thu, 01/10/2013 - 00:16 | 3139705 Jim in MN
Jim in MN's picture

Waiter, there's a fly on the turd in my punchbowl....

Thu, 01/10/2013 - 01:00 | 3139789 Yen Cross
Yen Cross's picture

It's official/ I'm long eur/aud. I'm also long gbp/aud.  Those trades are going to get whip/sawed.

 Knuckes had a good idea pertaining to those munies'

   Remember Simon and Simon, and Rip Tide knuckles?

Thu, 01/10/2013 - 01:03 | 3139804 Wanton1
Wanton1's picture

"Among a people generally corrupt liberty cannot long exist."


Thu, 01/10/2013 - 01:03 | 3139805 Yen Cross
Yen Cross's picture

SNB and  BUBA are reloading Australian bonds. 2-3 year notes. Fucking "WAX MUSEUM" investment!

Thu, 01/10/2013 - 01:15 | 3139832 Yen Cross
Yen Cross's picture

Barilla Pasta, 12oz boxes. Used to be 160z boxes? What gives?

  Ok I'm done joking/  You bunch of pussies! > who is that> watching your back>crunch<

  Fuck tards wake up!

Thu, 01/10/2013 - 01:18 | 3139837 Yen Cross
Yen Cross's picture

 Im technical/ not really/

 VIX will go to 20, e/u will go to 1.3120 before FRY DAY.

Thu, 01/10/2013 - 01:18 | 3139838 Yen Cross
Yen Cross's picture

 Im technical/ not really/

 VIX will go to 20, e/u will go to 1.3120 before FRY DAY.

Thu, 01/10/2013 - 01:20 | 3139846 Yen Cross
Yen Cross's picture


Thu, 01/10/2013 - 01:34 | 3139869 resurger
resurger's picture

Strange game... The only winning move is not to play.

Fuck you Brian Sack

Thu, 01/10/2013 - 01:36 | 3139873 WTFUD
WTFUD's picture

Bat's Life

Thu, 01/10/2013 - 02:07 | 3139914 Yen Cross
Yen Cross's picture

 i tried to explain  price action. I tossed the triangles and trend lines. I went spinning tops and shooting stars, last November.

 Dojis and inside closes.

Thu, 01/10/2013 - 04:31 | 3140019 Money 4 Nothing
Money 4 Nothing's picture

BATS shit crazy. Oh yea, and we told you so from the first pilot introduction of this programe fuck up last year.

Thu, 01/10/2013 - 04:52 | 3140033 Afrispaans
Afrispaans's picture

I just checked out . According to these guys, "all systens are functioning normally". So I guess this must be the "New Normal" everyone's on about. Number of people living in Josi who would get angry enough to take to the streets about price manipulation: maningi. 

Thu, 01/10/2013 - 08:29 | 3140146 dcb
dcb's picture

I do know the quote system I use and the quots I get off bats (my charting program) are often very different. But tyler as susual, you need to dop a bit better at explaining some of the rather tecnical orders you do

Thu, 01/10/2013 - 08:55 | 3140172 Quinvarius
Quinvarius's picture

The HFT algo junkies are trying to figure out why their HFT algos keep losing money.  Because obviously if you suck at trading, doing it really fast is the answer.  And so far that has not worked.  There must be an error in the system.

Thu, 01/10/2013 - 12:32 | 3140839 Clowns on Acid
Clowns on Acid's picture

Hey who cares ? Close enough for (French) bank work.

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