Autopsy Of A Dead Market: The Google Flash-Crash
Still chasing US equities up and down each day? Buying-and-holding large caps for their 'safety'? Reassured that money-on-the-sidelines will take us higher? Waiting for the Great Rotation? Perhaps the following post-mortem from Nanex on today's flash crash in the stock not of some microcap but of nearly $300 billion market cap behemoth Google, will reduce just a little of the fervor over what so many call the stock 'market' and its 'free' and 'efficient' nature.
This was no 'fat finger' as we are supposedly reassured by the media; but as BusinessWeek notes on trader's comments:
“Funny how two years ago this would have been a big issue. Now the market has almost become complacent of these errors.”
On April 22, 2013 at 9:37:11.500 (ET), Google Flash Crashed. The price dropped from $796 to $775 in about 3/4 of a second, then rebounded to $793 a second later. The drop invovled 307 trades and 57,255 shares from 10 exchanges + dark pools. During the drop, there were 5 orders placed for every trade executed (meaning 4 orders placed/canceled for every trade).
See charts of HES later the same morning which was likely from a fat finger (Google crash probably not from a fat finger)
2. GOOG - Showing bids and asks color coded by exchange.
Plenty of quotes, but few lasting long enough.
3. GOOG - Showing trades color coded by exchange.
Zooming in from Chart 1.
4. GOOG - Showing bids color coded by exchange.
There are 5 times as many buy orders as trades. Over 1,000 orders were placed and canceled during the 3/4 second drop!
5. GOOG - Showing trades color coded by exchange.
This is one second of data!