Big Ööps: Deutsche Börse Says "Flash Crash Can't Happen Here" A Week Before German Flash Crash

Tyler Durden's picture

Yesterday, courtesy of Nanex, we provided a close look into the internals of the flash crash that took place in yesterday's trading session of German stocks. What was made obvious, is that this crash happened as a result of the same sudden liquidity vacuum that took place in May 2010 in the NYSE, when the DJIA plunged by 1000 points on a surge in offers and no bids, leading to the infamous original flash crash (about which we warned in April of 2009 of course) crushing the market, before a mysterious buying power emerged out of nowhere and returned it to an almost unchanged level. What we did not know, and what makes yesterday's German mini crash both delightfully ironic and supremely humiliating to the largest German stock exchange operator, the Deutsche Börse, is that it was less than one short weeks ago that the very same Deutsche Börse, in a direct reply to Nanex itself, stated that what we witnessed on Wednesday night couldn't possibly happen. Six days later, it did.

To wit, Nanex from April 11:

And the Deutsche Börse response:

Er... Big Öööööps! 6 days later:

It wasn't just us. The very next day in Germany's Spiegel magazine:

Speculators wonder about mini flash crash

Within minutes, the Dax rushed around 180 points down - and also in the afternoon deep in the red. The European Stoxx index also lost a flash in value. Dealer puzzle over the cause of the small flash crash. Was a computer error the trigger?


Within minutes, the DAX plummeted and caused a stir in the trading rooms. In the top of the benchmark index fell 2.2 percent - a total of 180 points - to 7514 meters, the lowest level since early December. Then the price started again, the moment he is still around 1.7 percent in the red. Also the Euro Stoxx 50 Show chart lost flash 1.7 percent in value.


Flash Crash call stockbrokers such rapid crashes. On 6 May 2010 about the Dow Jones index had given way within minutes to nearly a thousand points and briefly cared for panic in the stock market. On 25 August 2011 was briefly the German index DAX lost four percent . Compared to earlier crashes the crash of Wednesday morning was so comparatively small.


However, he took care of uncertainty in financial markets. Some dealers expressed the losses with growth concerns in the euro zone or together with increased uncertainty because of a missile strike in the southern Israeli city of Eilat. They spoke of a "lemming effect": one begins - and all drag. Other traders declared the crash a technical problem: a computer error or a mistake in an order.


The German stock market looks behind the price drop. There have been no irregularities, a spokesman said. Trade and systems functioned properly.

Only they didn't. And what happened, and what will happen again, is that for a moment, its was HFT OFF.

This time, just like in May 2010, we were lucky that the algos resumed working after just a few moments of inactivity.

But what about next time, and the time after that? What will the various stock market operators say when stocks go from top left to zero in a vertical line, and when "investors" realize it was all a myth from the very beginning?

Finally, how can anyone have any faith or confidence in markets in which the stock exchange operators themselves have no idea what is going on?

Comment viewing options

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

I'm convinced that kim jong un and his band of sophisticated scientists are behind all of this!



McMolotov's picture

Sorry to say what, but what happened to that fat boy and his imminent war? Rumor is he hasn't actually been seen in public for weeks. Was he whacked by his own generals?

ParkAveFlasher's picture

They finally let the poor kid have some comic books.

Jack Napier's picture

Nuclear War is the name of his favorite Pokemon character. Language barrier fail.

gmrpeabody's picture

The "flash crash" was only a courtesy reminder about who really calls the shots...

MythicalFish's picture

"Alsö, the Euro Stoxx 50 Show chart lost flash 1.7 meters in value."


Translation courtesy of Google Translate Beta.

thismarketisrigged's picture

i will laugh so hard if the dow and s&p crashed to 0. these wall st bankers deserve nothing less

Pairadimes's picture

"There are no American tanks in Baghdad".

Abraxas's picture

Also, there are no Americans in Baghdad.

akak's picture

"If the Americans try to come here, we will crush them all and roast their bellies".

Abraxas's picture

I did not have sex with that woman (he was referring to Hilary)

TheFourthStooge-ing's picture

"But how much longer are we willing to put up with Iraq's noncompliance before we, as a council, we, as the United Nations, say: 'Enough. Enough.' The gravity of this moment is matched by the gravity of the threat that Iraq's weapons of mass destruction pose to the world."

edb5s's picture

Nanex is awesome. 

McMolotov's picture

And soon to be declared a cyberterrorism group or some other fake enemy of the state.

Colonel Klink's picture

Anyone not a sheeple is an enemy of the state.  Learn it early.  It may save your life.

waterwitch's picture

The umlauts on the 'oops' is a nice touch, Tyler.

Kiss My Icelandic Ass's picture

Good point. You know, a møøse once bit my sister...

semperfi's picture

Idiots know no borders - are everywhere.

Urban Redneck's picture

Typical German arrogance... at least the Americans can say they kicked their ass twice and pwned their gold.

Winston of Oceania's picture

And now we're saddled with a Gub'ment just like the one we took down last time... National Socialist go figure.

css1971's picture

To be fair to the Germans... A lot of the politeness structures we use in english is already built into the formal/informal grammar of the german language, so when they translate stuff to english it comes out as subtly as a half brick through the window.

Chippewa Partners's picture

Is there a Waddell and Reed field office in Germany?

Haager's picture

would it work with only bids and no offers also?  Just for the fairness, maybe...

Cognitive Dissonance's picture

To admit that something can happen requires (if one is to be intellectually consistent) that one admit that anything can happen.

<And that requires much more courage than most people are ready, able or willing to muster.....particularly if they are paid to look away.>

Corruption comes in many forms and flavors.

Renewable Life's picture

Ahhhhhhhh liquidity, it's the blood of the fiat bullshit, fractional reserve banking and trading system!!!!

I wonder where all this "liquidity" is going??? Hint:: refer to ZH article that headlines "63,500 oz of gold sold by us mint yesterday alone"

What's hilarious is, these fuck ups think if they artificially drive the price of gold and silver down on paper, they will kill the will to own it, thus driving people into other assets like stocks and bonds! Nothing could be further from the truth, the cheaper it gets, the more frantic and rushed the physical market will get!! Thus pulling massive amounts of liquidity from the fiat system even faster then higher prices would have!!! When you buy physical gold or silver, you pull the liquidity from a checking, savings or money market account in a bank, of which never returns to the system! These guys are so fucking stupid its hard to believe they are still alive!

Motorhead's picture

Mensch, was soll denn der Scheiss?

WVO Biker's picture

DAX index is stock prices PLUS dividends. All other indices are just stock prices. DAX in stock prices only is about on par with the CAC. German Börse cheating just a little bit. 

tradertim's picture

"the usa will never be downgraded" Timmy Geithner

"the titanic is unsinkable" Captain someone

"we are not in a housing bubble" Bernanke

"a flash crash could never happen here" Douche Borse Group

i'm seeing a pattern here

Winston Smith 2009's picture

"Big Ööps: Deutsche Börse Says "Flash Crash Can't Happen Here" A Week Before German Flash Crash"

Further proof that most mainstream economic "experts" either have no idea what they're talking about or are just plain liars.


Colonel Klink's picture

Occam's razor says they're liars!  Central banks around the world can't be wrong that often, even if they are stupid.  It's all an act to keep the raping going.

Winston Smith 2009's picture

"Central banks around the world can't be wrong that often, even if they are stupid."

Well, actually, they can be that wrong that often because Monetarism and Keynesianism are proven to be simplistic, 19th century GARBAGE theories which are used to produce equally garbacious economic models.  Any projections are further made garbage when politically manipulated garbage government economic figures are plugged into garbage models.  Garbage in -> garbage models -> extreme garbage out.

But that's the current dogma of the high priests in power (mostly bankers and former bankers) and it falsely justifies historic theft by banks while telling the idiot pols they can continue to borrow and spend with no consequences.  Thus, there's no mainstream resistance.

css1971's picture

We question that. Such kind of flash crash could not happen in Europe.

This is so very German.

You notice they refer to the German Bourse as Europe?

NotApplicable's picture

Then there's the wiggle-room phrase of "such kind." Obviously, it was a different kind of flash crash.

A uniquely German kind.

PontifexMaximus's picture

What a rubbish: there are 2 instruments every HF and his dog is trading in, S&P fut and DAX fut, fullstop. So, therefore, every algo is prog. on this indices. And those exchanges, "handling" these trades, is extremely happy, that it is and will be so, amen.

e m m's picture

So what caused liquidity to begin to disappear? Market maker algos got pulled out?

So the MSM can write about evil computers selling off the DAX now. Is this the same pattern as when the tax haven leaks appeared all of the sudden and the EU began seeding it's new tax agenda?

Is something in the making? EU PPT? HFT ban (expect for a select few)?


W74's picture

Thank you for using the "Old School" spelling which Deutschland decided to do away with (for simplicity or some other such bullshit) but which Austria, Switzerland and Luxemburg still use.  The new spelling methods just makes that old, noble language look silly.

Joebloinvestor's picture

The worst thing anyone can say is, "Can't happen".

Mother nature isn't the only one that will bitch slap you.

London Dude Trader's picture

That's nonsense.

Someone, probably  a large hedge fund (Paulson's?) has blown up and is in the midst of a large-scale liquidation that started with Gold on Friday. They decided to dump German stocks yesterday morning. That was real money selling, that's why the market never recovered and the selling continued in the US.  

What Nanex et al don't understand is that the German cash market is neither very liquid nor deep compared to its size (just look at the daily volume of any large cap in the DAX and compare it with any SPX100 stock.) The same is true for the DAX futures. The only equity index futures contracts where one can really trade size are ES and ESTX50. The DAX or FTSE futures will crash if you dump say 1000 contracts (a relatively small size for ES or ESTX50). Nothing to do with HFTs or any of that BS.  

sockratte's picture

what we dont know is whats going on in the dark pool that deutsche boerse offers to its clients

London Dude Trader's picture

Sure, feel free to keep deluding yourself with whatever BS conspiracy theory as you like. 

Satan's picture

Who is this Herr Glitch we keep hearing about?

Radical Marijuana's picture

Reality appears to conspire to tickle one's macabre sense of humour, in ways which ARE "both delightfully ironic and supremely humiliating."

Of course, what is extremely threatening is that kind of hubris is the foundation of our entire runaway system of triumphantly fraudulent financial accounting, which has been pumped up by electronics to the point where it appears to have gone beyond human control!

I continue to believe that the ouroboros of incorporated robbery is now spiraling through its toroidal vortices at such accelerating rates that there no longer are any human beings left as the "ruling classes" that can comprehend what is going on, and therefore, regulate and control that.

Instead, this kind of hubris is now the basic way that human beings pretend that they are still in control of runaway systems of force backed frauds, which have jumped the rails, to become automated frauds, taking place faster than mere mortals could respond to.

Since the SYSTEM is legalized lies, backed by legalized violence, which has very rapidly become electronic frauds, backed by atomic bombs, mere flesh and blood human beings are no longer able to supervise those processes. The inherent selection pressures operating have driven the evolution of systems which no longer are able to be understood by human beings.

The ruling classes in the past built these inhuman systems, based on their past triumphs of dishonesty, backed by violence, however, the innate struggle for survival and advantage has driven these things to implement technologies which are trillions of times beyond the mortal flesh and blood humans beings to be able to understand anymore.

The fundamental history of patriarchal militarism, transforming into fascist plutocarcy, has relatively suddenly grown to be orders of magnitude greater than any and all of the human beings that originally made and maintained those systems. Thus, these algos are becoming the runaway supreme expression of GI/GO. The triumphant financial frauds which are the basis of the original systems, have now been automated, and accelerated up to near the speed of light, which has transformed them in ways which almost nobody can comprehend anymore.

Of course, those who are supposed to be supervising these phenomena are, from a sublime point of view, displaying hubris which is amusing: Big Ööps, indeed!

soopy's picture