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Autopsy Of A Dead Market: The Google Flash-Crash

Tyler Durden's picture





 

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.”

Via Nanex,

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!

 


 


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Mon, 04/22/2013 - 12:56 | Link to Comment StarTedStackin'
StarTedStackin''s picture

Flash Crash......

 

 

I thougt that's what you got from mixing Mooseheads and ViCodins

Mon, 04/22/2013 - 13:02 | Link to Comment NotApplicable
NotApplicable's picture

So... looking at chart two, I see that Edge had quotes far outside of everyone else, down to the crash level. Is it safe to assume that the rogue algo was playing there?

Mon, 04/22/2013 - 13:06 | Link to Comment Divided States ...
Divided States of America's picture

THis is my thinking....Because of all these flash crashes on individual stocks....it maybe worthwhile to put on limit orders for stocks that are say 5% below the current price...so if AAPL is 400 bucks, I would put a limit order to buy at 380 to take advantage of these mini crashes if it happens. However if what I do catches on, then there will be a lot of people who will be putting the type of way below limit orders which are actually REAL orders...and this maybe the intentions of the algos to sucker people to put live orders into the fuckin markets.... because right now most orders are placed by algos and any trades are just punting around from the machines with a few real orders getting hit. Dont get fooled....this thing aint going to end well.

Mon, 04/22/2013 - 13:23 | Link to Comment smlbizman
smlbizman's picture

yea...until they cancel your orders because "you" cheated....unless of course you had stops set at very low levels and get taken out, than that is ok....

 

Mon, 04/22/2013 - 13:31 | Link to Comment rocker
rocker's picture

In all honesty, you really don't think there is a way to stop the HFT's, Goldman's, JPMorgan's, and other dirty hedge funds from doing this.

The SEC is worried that retail will not trust the market. LOL  What's the problem.

Since April 18th Google has done this.  

From: 785 to 765.  From: 796 to 761.  From: 766 to 780.  From: 766 to 803.  From: 803 to 775.  From: 775 to 798.  

The market is a Ponzi Scam at this point to garnish the banksters who control it all.  No Fed.  No Market.

Mon, 04/22/2013 - 13:51 | Link to Comment WTF_247
WTF_247's picture

They will not let you keep the gains.  I have thought of doing this myself across the board each day.  The problem is they hold regular investors to a much, much higher standard than they do these algo fools.  You and I have to actually have money in the account for each and every order placed.  Algo's do not.  hence the ability to put in 1000s of orders per second across hundreds of names. 

If you do decide to do it - DO NOT sell the position until the next day.  They have a nasty habit of cancelling out trades - if you sold it for a profit they will leave you short and likely at a sizable loss.

Mon, 04/22/2013 - 15:35 | Link to Comment Chartsky
Chartsky's picture

What you say is true . . . so why keep playing where the game is rigged?

Trade Stock Index futures and start looking at Exchanges in other parts of the world where the politicians have not allowed their Bankster masters to fix the entire market.

Just a suggestion.

Mon, 04/22/2013 - 14:23 | Link to Comment mammoth mo
mammoth mo's picture

You forgot the peaking factor.

Algo's and HFT's peak (look at) orders.

They will zoom down and take your order and then go back to a different price.  A couple of years ago I had stops on stocks that I let carry over one morning.  Sure enough, the stock opened at my loss limit and then zoomed up right after it.

You can't put stops in unless you are willing to let the HFT's take them at your loss.  

The market is now a guessing game for humans.

 

 

Mon, 04/22/2013 - 15:20 | Link to Comment cocoablini
cocoablini's picture

The first big flash crash WAS probably an algo gone bad. BUT, since the exchanges disallowed only the trades that occured 10% lower than the asking price at the start of the crash it was pretty evident that you could:

-Zipper out the limit order weak hands of stock 

-Snag the stock at a 10% discount

-Rerun the algos to get the stock back to the original price before the stock.

That means that within 3/4 second you can make 10% guaranteed

Where's the risk if you can spoof orders to crash a stock and respoof orders to have the computers follow you back up?

If there was a time limit on stock trades, then the banks couldn't guarantee  their trades would work-hence why the colocation of Goldman's supercomputer in the NYSE is so important. Time is divisible and some computers are faster than others. If you don't have to commit REAL CAPITAL to move a market then this crap will go on all day long. SEC can't do a thing since the markets have no liquidity. There's no BID except the fake ones. Stock market died in 2011...for good.

Mon, 04/22/2013 - 16:23 | Link to Comment StarTedStackin'
StarTedStackin''s picture

Sorry about that post, but you'd understand if you've ever had thorasic shingles......MFers that hurts

 

 

 

 

"Roller" by April Wine, 1 Vicodin and EIGHT Mooseheads does make it better.....though

Mon, 04/22/2013 - 12:55 | Link to Comment Perpetual Burn
Perpetual Burn's picture

Eric from Nanex  is dishonest. When questioned about the W&R data he will go silent or block you on Twitter.

Mon, 04/22/2013 - 13:00 | Link to Comment NotApplicable
NotApplicable's picture

How so?

Mon, 04/22/2013 - 13:13 | Link to Comment Perpetual Burn
Perpetual Burn's picture

W&R gave their trade data to him, and Eric stated their aglo was passive.Eric gave that data to  Albert J. Menkveld and he found the W&R algo to be 50% aggressive, contradicting Eric's conclusionWhen asked about this he goes silent and has blocked many people on twitter for asking him

Mon, 04/22/2013 - 13:04 | Link to Comment nanex
nanex's picture

I only block those who won't take the time to read what we've spent considerable time researching/writing. And you have to be pretty obnoxious about it. You think my followers want to hear someone repeatedly ask the same questions we've addressed over and over and over?

Mon, 04/22/2013 - 13:17 | Link to Comment Perpetual Burn
Perpetual Burn's picture

Answer it then. Why did Albert J. Menkveld state the algo was 50% Aggressive, and you state is was 100% passive? 

Mon, 04/22/2013 - 20:40 | Link to Comment Golden_Rule
Golden_Rule's picture

Well, what do ya know.  He couldn't muster up a reply for ya.  We should ask ourselves, how many other ways does Nanex resemble Krugman?  Oh, thats right, they are one in the same.

Mon, 04/22/2013 - 13:31 | Link to Comment Cursive
Cursive's picture

@Perpetual Burn

 

Please elaborate.  What about Waddell & Reed?

Mon, 04/22/2013 - 12:57 | Link to Comment TeamDepends
TeamDepends's picture

What does Google sell again?

Mon, 04/22/2013 - 12:58 | Link to Comment RaymondKHessel
RaymondKHessel's picture

Owen Wilson Movies?

Mon, 04/22/2013 - 12:59 | Link to Comment toys for tits
toys for tits's picture

Spyware.

Mon, 04/22/2013 - 12:58 | Link to Comment NotApplicable
NotApplicable's picture

YOU!

Mon, 04/22/2013 - 13:00 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Access to your most private underwear drawer.

Mon, 04/22/2013 - 13:00 | Link to Comment Winston of Oceania
Winston of Oceania's picture

Everything about you that they can dig up...

Mon, 04/22/2013 - 14:07 | Link to Comment syntaxterror
syntaxterror's picture

No idea. But I have Ad Blocker.

Mon, 04/22/2013 - 18:02 | Link to Comment Trampy
Trampy's picture

intangibles

Mon, 04/22/2013 - 13:00 | Link to Comment ekm
ekm's picture

I read that cancelling jacson hole meeting is similar to the president cancelling the state of the union address due to misscheduling.
I also read that in 25 years no chairman ever missed that meeting.

My take is that Benny is making it clear that he is irrelevant, his participation would be irrelevant since other people are making decisions and he's just carrying orders.

It will come a moment you will all understand that QE is purely and simply a POLITICAL decision taken in places above Benny's paygrade and has got little to do with finance.

Same as Cyrpus decision which was taken in places way above Draghi's paygrade, hence Draghi's disappearance during those days. Same as Benny, Draghi is providing some advise, but basically at the very end, simply carrying orders as good academic-soldiers they are.

 

It's all over, QE is dead soon. Nobody is caring any longer about any GOOGLE crash or you name it. Everybody is bored, economy is dead, oil has been in hyperinflation plateau since 2004 with a short relieve in 2008.

QE is dead. Prepare for it.

Mon, 04/22/2013 - 13:00 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Benny is just making way for the new and improved Ink Jets.

Mon, 04/22/2013 - 13:04 | Link to Comment ekm
ekm's picture

He'll crash it (on Obama and Boehner's orders) to make way for the new gal/guy to reflate it.

 

Obama and Boehner are buddy-buddy in case you haven't noticed. 90% of the their conversations are about golfing.

Mon, 04/22/2013 - 13:04 | Link to Comment NotApplicable
NotApplicable's picture

With the remaining 10% about boys.

Mon, 04/22/2013 - 13:12 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

My first laugh-out-loud of the day.

Thanks! :)

Mon, 04/22/2013 - 13:12 | Link to Comment ekm
ekm's picture

LOL

Mon, 04/22/2013 - 13:16 | Link to Comment Dr. Engali
Dr. Engali's picture

I think you're wrong as, he has his whole legacy on QE and the "wealth effect". If he crashes it ,it will happen after they give him some sort of cover.

Mon, 04/22/2013 - 13:32 | Link to Comment ekm
ekm's picture

Fine. We're all trying to figure it out.

Mon, 04/22/2013 - 13:55 | Link to Comment oddjob
oddjob's picture

Grow a pair and just once use I instead of we.

Mon, 04/22/2013 - 13:54 | Link to Comment ekm
ekm's picture

I am trying to figure this out

Mon, 04/22/2013 - 14:00 | Link to Comment oddjob
oddjob's picture

I am trying to figure how your response was clocked before my post.

Mon, 04/22/2013 - 14:21 | Link to Comment ekm
ekm's picture

WOW, strange

Mon, 04/22/2013 - 15:22 | Link to Comment recidivist
recidivist's picture

same way Whitey Bulger won the lottery by entering just 'before' the drawing...

Mon, 04/22/2013 - 20:02 | Link to Comment Non Passaran
Non Passaran's picture

Comment IDs are properly ordered.
Web server times may have been be different , no big deal.

Mon, 04/22/2013 - 16:39 | Link to Comment silverserfer
silverserfer's picture

yeah they got those new QE-3D printers. Steven Speilberg type shit  

Mon, 04/22/2013 - 13:04 | Link to Comment bdc63
bdc63's picture

but, but, but ... if The Bernak doesn't go to Jackson Hole, who the heck is Steve Liesman going to go fishing with?

Mon, 04/22/2013 - 13:26 | Link to Comment smlbizman
smlbizman's picture

im sure liesman will have some other worm in his mouth....

Mon, 04/22/2013 - 16:06 | Link to Comment imbrbing
imbrbing's picture

"I read that cancelling jacson hole meeting is similar to the president cancelling the state of the union address due to misscheduling."

Is there ever going to be another meeting? What exactly is on his "schedule" that is that important to miss this meeting?

Is this the time they are going to "bunker up" finally? They already proved to themselves they can lock cities down at the

drop of a hat, would they not now feel comfortable "pushing the button"?

 


Mon, 04/22/2013 - 12:57 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

It's not the fall that will kill you, but the sudden stop (of liquidity).

Mon, 04/22/2013 - 12:58 | Link to Comment Reformed Sheep
Reformed Sheep's picture

Algorithmz, bitchez!

 

Mon, 04/22/2013 - 12:58 | Link to Comment Political_Savage
Political_Savage's picture

This nano-second shit is always over my head

I get it, don't trust the machines.

Mon, 04/22/2013 - 14:24 | Link to Comment aerojet
aerojet's picture

Well, it's all tied up in the basic idea that time is infinitely divisible. 

Mon, 04/22/2013 - 22:39 | Link to Comment StychoKiller
StychoKiller's picture

Neigh, anything less than 5.39106(32) × 10-44 s (Planck time), is meaningless.

Mon, 04/22/2013 - 12:59 | Link to Comment falak pema
falak pema's picture

this ain't a market this is the private home of the elite; no place for the common man.

Mon, 04/22/2013 - 13:03 | Link to Comment Never One Roach
Never One Roach's picture

Better wake the PPT up...they partied too much this weekend.

Mon, 04/22/2013 - 13:06 | Link to Comment realtick
realtick's picture

false flash event

Mon, 04/22/2013 - 13:07 | Link to Comment FieldingMellish
FieldingMellish's picture

Why are HFT's good again? Oh yeah.. "liquidity". The system is broken and breaking it further won't make it better.

Mon, 04/22/2013 - 13:11 | Link to Comment fats
fats's picture

gCoins bitchez!

Mon, 04/22/2013 - 13:10 | Link to Comment orangegeek
orangegeek's picture

This move is so obviously made on the fundamentals of the company.....oh wait, I mean a roulette wheel.

Mon, 04/22/2013 - 13:12 | Link to Comment rsnoble
rsnoble's picture

Prop up at all costs until we have all the guns, black powder and pressure cookers then fuck everyone to death.  Don't fucking doubt it for a minute.

Mon, 04/22/2013 - 13:12 | Link to Comment razorthin
razorthin's picture

Ahrr.  Just a seedy MM adding to his inventory to continue the fleecing.

Mon, 04/22/2013 - 13:15 | Link to Comment MrBoompi
MrBoompi's picture

I suppose somebody could have bought at the low, then immediately sold after the price rebounded, for a cool $1.2 million pocketed in a few seconds.  Or conversely, shorted the stock, got some partners to help dump the price, then covered before the price went back up.  But I realize things like that just don't happen on Wall St.  That would be cheating right?

Mon, 04/22/2013 - 13:21 | Link to Comment FieldingMellish
FieldingMellish's picture

In the new normal, its not cheating if its profitable.

Mon, 04/22/2013 - 14:32 | Link to Comment Diogenes
Diogenes's picture

It's only cheating if you get caught and  the cops have wooden legs, the detectives are blind and the bulldogs have rubber teeth.

Mon, 04/22/2013 - 13:18 | Link to Comment mdtrader
Mon, 04/22/2013 - 13:20 | Link to Comment ThisIsBob
ThisIsBob's picture

No human beings were harmed in the making of this move.

Mon, 04/22/2013 - 15:29 | Link to Comment NoWayJose
NoWayJose's picture

Unless you had a stop loss order in place...

Mon, 04/22/2013 - 13:23 | Link to Comment Racer
Racer's picture

Over 1,000 orders were placed and canceled during the 3/4 second drop!

They should make cancelling of all those orders illegal if they werne't intending on actually trading them..

Oh wait, it is illegal.....

so why is it still happening?

Mon, 04/22/2013 - 13:48 | Link to Comment W74
W74's picture

Because those regulating the system have no idea how it actually works and the people who DO know how it actually works are actually working it and have no intention of 'fixing' the way business as usual is done.

Mon, 04/22/2013 - 14:06 | Link to Comment Gromit
Gromit's picture

If you can't stand the heat stay out of the kitchen.

 

Mon, 04/22/2013 - 14:07 | Link to Comment The Invisible Foot
The Invisible Foot's picture

My personal favorite HFT strategy is the "whack-a-mole". Were algos get other algos to buy high and sell low.

Mon, 04/22/2013 - 14:12 | Link to Comment fallst
fallst's picture

Yes, Perfect, These Thugs are tripping off everybody's Stop Losses, then buying back at bottom...If Everybody puts a limit order to buy at some number 10-20% below current prices, it could defeat these HFT CS'ers.

Mon, 04/22/2013 - 14:18 | Link to Comment aerojet
aerojet's picture

Then they will spot that trick and find a way to fuck the limit buyers, too.

Mon, 04/22/2013 - 16:44 | Link to Comment auric1234
auric1234's picture

Can't do. Stops are inherently broken, which is what they're exploiting. This doesn't apply to limit orders.

 

Mon, 04/22/2013 - 14:18 | Link to Comment aerojet
aerojet's picture

Did it shake out the stop orders?  That's the real question.

Mon, 04/22/2013 - 14:24 | Link to Comment Godisanhftbot
Godisanhftbot's picture

 Well, if you had a stop , and it didn't execute , and the stock kept dropping, you'd bitch and moan to the broker.

 

 So , I'd assume all stops triggered.

 

Since I'm not dumb enough to place hard stops, I couldn't tell you first hand

Mon, 04/22/2013 - 14:36 | Link to Comment mammoth mo
mammoth mo's picture

So once upon a time a city was losing thousands of dollars in equipment on a daily basis.

They decided to stake out the city works department to investigate.  Everyday they would check each and every truck that went out of the yard for contraband.  Everyday nothing.

After about a month it became clear what they were stealing.

Trucks.

The vehicle in this case the trades that are done are the theft.  The fact that the trades can ride out of the yard with value and never return is the problem. 

If you have a license to trade at a HFT level you have a license to steal period.

If you have a license to trade through a broker or over the internet or by phone you are the patsy period.

 

Mon, 04/22/2013 - 14:47 | Link to Comment sitenine
sitenine's picture

Chaos is the new normal.

Mon, 04/22/2013 - 15:51 | Link to Comment Aurora Ex Machina
Aurora Ex Machina's picture

Eric Schmidt has been in the limelight recently with an old interview with wikileaks just published. While Assange does himself little favors in it (the ending... ugh), the contents are interesting, especially regarding BitCoin and URLs. You could look into the various start-ups over shortening names (I seem to remember Yahoo! just paying $30mil for one such contender) then look back over the interview.

 

 

I suspect someone somewhere was sending a message.

Mon, 04/22/2013 - 16:18 | Link to Comment kchrisc
kchrisc's picture

"It's black swan season, and I'm hunting black swans, so be vewy, vewy quiet"

                                                                       Elmer Fudd rebooted for the 21st. century.    hujel

Mon, 04/22/2013 - 16:34 | Link to Comment CHX
CHX's picture

Matrix has cracks ?

Mon, 04/22/2013 - 22:36 | Link to Comment EclecticParrot
EclecticParrot's picture

I've suggested this before and each new set of Nanex pictures proves it:  Paul Klee wasn't a painter, he was a colorful, beautifully aggressive algo, the first of his kind, coming decades before the computer age.  

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