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SPY Option Quote Stuffing Or Explaining Today's 25 Point S&P Levitation

Tyler Durden's picture





 

The major compression in VIX into the close combined with a complete lack of JPY-based carry-driver for the equity market comeback today has many asking just what happened? Though the mechanism for quote-stuffing or momentum ignition in this case is unclear - one thing is absolutely crystal clear - today's total and utter explosion in the quote volume for SPY options provides more than a little concern for just what this market has become. As Nanex notes, over 1.1 billion quotes for SPY Options were posted today as 'quote spam' seems to be serving as some kind of parasitic momentum spark. The point here is that just as the market's flash-crash occurred on a day in which quote-stuffing in cash stocks hit a record; so today we got the inverse flash-smash higher in stocks from a surge in quotes on the far-more levered options market. Just look at these charts!!

 

Simply put - this spamming in the levered options market explains how the S&P 500 can leviate 25 points on low volume amid every other risk-asset's almost total nonchalence...

Via Nanex,

Obviously, no one at the SEC is paying attention. There should be an immediate review of recently proposed or added (10 share contracts) option contract types. In addition, a moratorium on new option's exchanges until this alarming explosion of unwanted quote spam is addressed. 

1. SPY Options Quotes - Daily Counts. Note, the scale is in millions.
Over 1.1 billion option quotes in a day for just one equity symbol.



3. SPY Options Trades - Daily Counts. Note the scale in the chart above (quotes) is in Millions.
Where are the trades? Maybe it's harder to execute trades in a sea of quotes.

 



3. SPY Options Quote/Trade Ratio.
The number of quotes for every trade is accelerating at an alarming rate.


 


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Thu, 06/06/2013 - 17:12 | Link to Comment hubris
hubris's picture

The credit market (HY20) had stabilized and in fact moved materially higher before the equity rip, so it's hard to say that it was just equities alone.

Thu, 06/06/2013 - 17:15 | Link to Comment CrashingDollars
CrashingDollars's picture

>hard to say that it was just equities alone

It was magic

Thu, 06/06/2013 - 17:16 | Link to Comment BandGap
BandGap's picture

No, it's smoke and mirrors. You have to see through it, it is all there.

Thu, 06/06/2013 - 17:22 | Link to Comment Aguadulce
Aguadulce's picture

Better levitator:  Criss Angel or the S&P?

Thu, 06/06/2013 - 17:45 | Link to Comment kaiserhoff
kaiserhoff's picture

No Mystery, Tyler.

Cheapest way to pimp the market, er, pump the market, uh, same difference.

Thu, 06/06/2013 - 18:19 | Link to Comment AldousHuxley
AldousHuxley's picture

Putin divorces wife

Russia is America

America is Russia

Thu, 06/06/2013 - 18:24 | Link to Comment jbvtme
jbvtme's picture

TD...great post

Thu, 06/06/2013 - 18:39 | Link to Comment Manthong
Manthong's picture

A market is a terrible thing to waste.

Thu, 06/06/2013 - 20:41 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

.

Obviously, no one at the SEC is paying attention.

Unfair accusation. No one at the SEC is paying attention to securities exchanges.

Thu, 06/06/2013 - 18:28 | Link to Comment Glasnost
Glasnost's picture

It's getting there.  Especially once he keels over.

Thu, 06/06/2013 - 19:01 | Link to Comment RockyRacoon
RockyRacoon's picture

If Santelli isn't all over this tomorrow, he's a shill.

Thu, 06/06/2013 - 18:30 | Link to Comment stocktivity
stocktivity's picture

It's all Bullshit!!!

Thu, 06/06/2013 - 17:18 | Link to Comment jcaz
jcaz's picture

LOL- no it's not-  the credit market didn't produce the psycho ramp-up in SPY quotes/trade ratio.....

Thu, 06/06/2013 - 17:12 | Link to Comment jcaz
jcaz's picture

LOL- yeah, it's just humorous anymore.....

Thu, 06/06/2013 - 17:24 | Link to Comment YC2
YC2's picture

this is a dog with a deceptively strong tail

Thu, 06/06/2013 - 19:16 | Link to Comment max2205
max2205's picture

Should have been a great day for my trades but it was brutal and I never shorted..fuck

Thu, 06/06/2013 - 17:13 | Link to Comment ParkAveFlasher
ParkAveFlasher's picture

These charts look like Maria B's false eyelashes.

Thu, 06/06/2013 - 17:14 | Link to Comment Dr. Engali
Dr. Engali's picture

Tapering my ass. The only thing the Bernspank is tapering is the shit flying out of his mouth.

Thu, 06/06/2013 - 17:17 | Link to Comment fonzannoon
fonzannoon's picture

Doc are you really an interested buyer here?

I was for about a second. I think this was just a false start.

Thu, 06/06/2013 - 17:24 | Link to Comment Dr. Engali
Dr. Engali's picture

Yeah but I didn't go crazy. I believe the shorts will get squeezed again. I for one don't think the Bernank will allow them that pleasure.

Thu, 06/06/2013 - 18:08 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

When HFT is 80% of volume, why care abaout shorts or longs or traders at all.  They more or less don't exist, and if they do exist, it is in numbers too few to matter.

There is no market.  Everyone here knows it, but everyone here thinks they should be involved.

Stop.  Just stop.  It's all HFT.  You're not going to beat HFT.

Get your money out and buy farmland.  And rent a farmer to farm it.  Calories are fungible dividends.

Thu, 06/06/2013 - 18:18 | Link to Comment fonzannoon
fonzannoon's picture

You are telling a guy (or two) who spent years building a business to just close up shop and do something else.

Ain't happening.

We both, in our own ways, make it known to the people we deal with, what we feel is prudent. In a way, most of them are trapped anyway through retirement plans etc. and just want someone to guide them. If it ain't us it will be some snake oil salesman.

Thu, 06/06/2013 - 18:28 | Link to Comment john39
john39's picture

the entire world is trapped in 'their' system...  and there is no easy exit.  but at some point, exit we must, or the enslavement will be irreversible.

Fri, 06/07/2013 - 18:43 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

it is happening. You don't get a choice. You go with what you have or you lose it all.

Thu, 06/06/2013 - 18:33 | Link to Comment stocktivity
stocktivity's picture

He's not tapering that either...just the direction of the shit flying out of his mouth.

Thu, 06/06/2013 - 23:23 | Link to Comment Pareto
Pareto's picture

"Bernspank"  he he.

Thu, 06/06/2013 - 17:15 | Link to Comment _ConanTheLibert...
_ConanTheLibertarian_'s picture

Inverse flash crash!

Thu, 06/06/2013 - 17:15 | Link to Comment nqs_alpha
nqs_alpha's picture

am i reading this right? around  14,000 quotes for each trade? and is that spike around 2011 right around the 'flash crash'? simply ... amazing ... and no one goes to jail fro this manipulation ? ... oh i forgot ... first they need to get corzine right?

 

Thu, 06/06/2013 - 17:47 | Link to Comment alien-IQ
alien-IQ's picture

Of you steal baby formula from a wal mart to feed your starving child, you go to jail.

If you steal 6 billion dollars from investors, they make you ambassador to Israel.

Thu, 06/06/2013 - 19:09 | Link to Comment nope-1004
nope-1004's picture

Give me a gun and I'll rob a bank.  Give me a bank and I'll rob the world.

 

The fact that the SEC "obviously doesn't care" is because the FED runs the SEC.  SEC is powerless when the FED is intent on gaming the system to their advantage or their outcome.

There is no market.  There is an illusion.  You gotta know that at some point the entire fucking thing is going to blow up in their face - and ours!

 

Fri, 06/07/2013 - 17:50 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

They'll get Corzine... to Chair the SEC! :D

Thu, 06/06/2013 - 17:15 | Link to Comment BandGap
BandGap's picture

You have to bury the real data in a shitload of noise. C'mon, you should be able to create a function (mathematical derivative) to show how this worked. 

Thu, 06/06/2013 - 18:19 | Link to Comment Rainman
Rainman's picture

It's called dropping the bait hook into the middle of the chum....the fishermen will know what I mean.

Thu, 06/06/2013 - 17:15 | Link to Comment Cult of Criminality
Cult of Criminality's picture

Hmmm

Thu, 06/06/2013 - 17:21 | Link to Comment fonzannoon
fonzannoon's picture

There is no market. Every piece of data is now leaked early every single time. The ramps are so obvious it's not even worth pointing them out. CNBC spent hours today wondering why a hedge fund being indicted for insider trading has not performed as well as the market has SINCE THEY OBVIOUSLY HAD TO STOP INSIDER TRADING.

It can't get anymore stupid, and it can't get anymore fake.

Thu, 06/06/2013 - 17:28 | Link to Comment Dr. Engali
Dr. Engali's picture

Did you see that the ten year tagged and tested 2% today? I didn't notice it until later on. I thought it was an interesting test.

Thu, 06/06/2013 - 17:35 | Link to Comment fonzannoon
fonzannoon's picture

i saw 2.03%.

That is the irony.  If it breaks below 2% I think people start buying. At 2.15 I think it gets capped. Everyone sells.

I think we bang around in this range until we break one way or the other. If we break lower it's only because data has to be horrendous or Japan really blows up. I don't know if that is enough to send stocks higher anymore. It prob is.

If we break higher stocks get creamed.....So why would we break higher?

My guess is Bernanke's legacy. Remember Greenspan moved rates up on his way out as a handoff to the next guy. I wonder if Bernanke's bullshit taper is just him trying to give some breathing room to the next guy so they can immediately launch some new bullshit program and drop yields and hope for more bubbles so we can keep on extending and pretending. If the market drops 20% from here on our way to 2.75% on the ten year the Bernak can still say he got a round tripper during his tenure and was a hawk on his way out.

Thu, 06/06/2013 - 18:11 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

The 10 year moves with JPY.  If we get a bad jobs number tomorrow, the dollar will crash (aka yen will get stronger, maybe crack below 95).  That could take the 10 year well south of 2%.

If they airbrush the number favorable, we'll go back to 2.12, until next week when Fed buying of yen re-asserts itself and drives the 10 yr south of 2% . . . .

It was only a few weeks ago we spoke of negative NOMINAL 10 year rates.  Nothing has changed.  Might still be coming.

Thu, 06/06/2013 - 18:16 | Link to Comment fonzannoon
fonzannoon's picture

I agree completely about Japan. I still say if their bond market blows up, I think it sends our yields soaring. If their stock market completely implodes, our yields drop big time.

They are a complete wildcard.

Thu, 06/06/2013 - 21:45 | Link to Comment NoDebt
NoDebt's picture

If their bond market "blows up" it's time to head for the bunker and break out the canned beans.  Very few major financial institutions around the world could withstand the shockwaves (because it would almost instantly ignite counterparty failures, not just direct-holder failures).  I think it would be a "planet killer."

If their stock market tanks I couldn't offer much opinion other than to say the worldwide effects would likely be much more muted.

 

Thu, 06/06/2013 - 21:52 | Link to Comment fonzannoon
fonzannoon's picture

I agree completely nodebt. Although I wonder if their stock market tanking this time ends up leading them to the same currency collapse that the bond market collapse will definitely lead them to.

Thu, 06/06/2013 - 17:40 | Link to Comment Godisanhftbot
Godisanhftbot's picture

 sac advertised for brokers to bring them private info. right there in the promo materials. at least they were up front about it. 

 

 probably too many brokers for them to take to dinner and surrepticiously 'pitch', so they printed it up.

Thu, 06/06/2013 - 17:27 | Link to Comment SPAREPARTS
SPAREPARTS's picture

I dont know enough about the process, why is this bad?

Thu, 06/06/2013 - 17:40 | Link to Comment trippy64
trippy64's picture

www.buzzfeed.com is over ther, perhaps it is more your speed.

Thu, 06/06/2013 - 18:55 | Link to Comment MarsInScorpio
MarsInScorpio's picture

Don't be a jerk to someone trying to get educated. The whole problem is low-information voters/investors - let this person try to become a high-information voter/investor.

 

Your attitude is why you are getting down arrowed to death.

 

Get with the program.

-30-

Thu, 06/06/2013 - 22:17 | Link to Comment therover
therover's picture

Well said MarsinScorpio.

Since the scumbag oligarches want/need low-information voters/investors, it is always worth while to educate anyone asking questions about the market/finances and trying to learn (heck, I learn a hell of a lot everyday reading the articles on ZH and the subseguent responses of some of our esteemed members).

High information voters/investors scare the shit out of the above mentioned scumbags.

Let us all try to encourage more and more people to become HIVI's (just made that up but please take credit Marsin) and help them as best we can. 

 

Thu, 06/06/2013 - 23:21 | Link to Comment Pareto
Pareto's picture

You're trying to talk sense to somebody who doesn't have the intellectual capacity to actually give a fuck.

Thu, 06/06/2013 - 17:42 | Link to Comment alien-IQ
alien-IQ's picture

Imagine you are buying something at an auction. You want to own it so you place a bid, then 14,000 bids suddenly flood the auction for the same item...but none of those bidders had any intention of actually buying. The only purpose it served was to get you to place a much higher bid.

That's why it's bad. By another name, this is also known as fraud.

Does that help?

Thu, 06/06/2013 - 18:15 | Link to Comment A82EBA
A82EBA's picture

Yes, Thank You

Fri, 06/07/2013 - 17:42 | Link to Comment MeelionDollerBogus
Thu, 06/06/2013 - 20:35 | Link to Comment gonetogalt
gonetogalt's picture

Best to lurk quietly, spareparts.

Thu, 06/06/2013 - 21:05 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

You don't need to lurk quietly, Spareparts. You asked a question about something with which you weren't familiar. It was answered better than I could have done.

Asking questions is the path to knowledge.

Don't be hesitant to ask questions and don't be worried about making mistakes. Everyone makes mistakes.

Be aware that displays of defiant ignorance, exhibitions of arrogant shilling, and/or propagandic offuscation by monolizing the speeching means may be subjected to verbal excoriation far beyond that which is necessary.

That's pretty much it.

Thu, 06/06/2013 - 17:38 | Link to Comment Godisanhftbot
Godisanhftbot's picture

 dont know why the turkeys are calling this an 'inverse flash crash'.

nothing of the sort. was a very orderly reaming of anyone dumb enough to put on shorts at the bottom.

 

 

Thu, 06/06/2013 - 17:43 | Link to Comment bonzo112358
bonzo112358's picture

The SEC will never look into these up moves.  If it were a 25 point down move CNBC and the SEC would be all over it.  Everyone looks the other way when markets go higher.

Thu, 06/06/2013 - 19:06 | Link to Comment WTFUD
WTFUD's picture

So what your sayin' is that these folks at the SEC are being paid to look the other way? Shucks! Gawd! Whoda guessed?

Thu, 06/06/2013 - 20:30 | Link to Comment John Law Lives
John Law Lives's picture

"So what your sayin' is that these folks at the SEC are being paid to look the other way?"

That plus watching porn...

SECFUBAR.

Thu, 06/06/2013 - 21:09 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

.

The SEC will never look into these up moves

...unless they can somehow be embedded in the latest youpornomatic interwebtubes viral DVDA videos.

Thu, 06/06/2013 - 17:49 | Link to Comment Haager
Haager's picture

Me idiot spent half an hour to get some reason for this change in sentiment, before I realised that it's a made-up market and that they'll use possible reasons as a smokescreen.

Thu, 06/06/2013 - 18:14 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

Duh.

HFT is 80% of volume.  CNBC DARES NOT DWELL ON THAT.  Their advertisers all want to collect fees for assets under management. 

Look, stop being silly.  NEVER TRADE STOCKS AGAIN.  Period.  Just sell it all and buy farmland.  Collect dividends out of the ground each year.  Don't worry about the price of the dirt.  Just collect the calories and trade them for dollars sometime.  Rent a farmer to do the work (and teach you).

In 10 years, you'll be king of your community.  And odds are very good that if you're on this site, you know it.

Thu, 06/06/2013 - 22:42 | Link to Comment HardAssets
HardAssets's picture

Hope you have very deep pockets if youre gonna buy farm land.

Farmers in these parts (western US) are doing very well. No ones selling their very profitable asset. Where are they going to put the proceeds- - - the stock market ?  LOL

Note: I'm talkiing about full scale production farms. I have no idea what the market is like for 'hobby farms'.

Thu, 06/06/2013 - 17:51 | Link to Comment robochess
robochess's picture

and finally who gives a fuck any more. It's a rigged, manipulated market and you are not the rigger, you is the riggee.

Thu, 06/06/2013 - 18:24 | Link to Comment 1000 splendid suns
1000 splendid suns's picture

No shit. One can only imagine Captain 'ben shalom' Kirk standing behind Worf the quant yelling "ENGAGE! ENGAGE! ENGAGE!" on the rigged warp drive market.

Total loss of control or trying to steer a tanker with a speed boat?

Thu, 06/06/2013 - 18:04 | Link to Comment digalert
digalert's picture

Damn right this needs an immediate investigation. You've got the SEC, the Bernanks banker buddies and let's not forget Bart over at the CFTC, all complicit in this racket. Which looks like it violates the Racketeer Influenced and Corrupt Organizations yeah baby RICO act.

Thu, 06/06/2013 - 19:11 | Link to Comment WTFUD
WTFUD's picture

Look why do you think Barts in charge at CFTC? The man couldn't locate his socks in a spin dryer!

Fri, 06/07/2013 - 17:38 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

but... but... but... NEFARIOUS!!! Bart's SURE of it!

Thu, 06/06/2013 - 18:08 | Link to Comment JSD
JSD's picture

At 16,000 on chart 3, Skynet becomes self-aware.  

Thu, 06/06/2013 - 18:22 | Link to Comment razorthin
razorthin's picture

Die, coxxukkers.

On a side note, here's a pearl - My employer just began to block THIS site as a GAMBLING site.  But I can still get CNBS.  That's rich.

Thu, 06/06/2013 - 18:30 | Link to Comment ebworthen
ebworthen's picture

Funny.

Next your employer will block the "Gamblers Anonymous" website, and make Yahoo! Finance the default page when you open your browser.

Thu, 06/06/2013 - 18:27 | Link to Comment Hongcha
Hongcha's picture

Razorthin, OTOH our firm jettisoned the firewall SW to save costs!

Thu, 06/06/2013 - 18:29 | Link to Comment Unprepared
Unprepared's picture

Ben chickens out and starts QE-Hi5 before he leaves the Fed.

No, he won't

Thu, 06/06/2013 - 18:33 | Link to Comment ebworthen
ebworthen's picture

Reality must not intrude upon perception!

Thu, 06/06/2013 - 18:35 | Link to Comment Unknown Poster
Unknown Poster's picture

With more quote stuffers playing in todays ALGO-500, it is harder to get an edge on the other stuffers, so they have to try harder.

Thu, 06/06/2013 - 18:54 | Link to Comment g'kar
g'kar's picture

It was definitely investors seeing the value here based on solid economic data at the last moment of the trading day.

Thu, 06/06/2013 - 19:17 | Link to Comment Everybodys All ...
Everybodys All American's picture

After seeing this does anyone actually believe tomorrow's NFP will not be perfect for the market? This government and this administration are corrupt to the core. Collect this one NSA.

Thu, 06/06/2013 - 19:50 | Link to Comment omi
omi's picture

And nothing to do with 1600 level?

Thu, 06/06/2013 - 20:04 | Link to Comment CheapBastard
CheapBastard's picture

I admire these guys who can monitor and write this stuff....many thanks to this author and all the Tylers who   keep us abreast....Besos y Abrazos.

Thu, 06/06/2013 - 20:25 | Link to Comment chump666
chump666's picture

Don't short this yet, last sell was HFTs, meltup was HFTs.   Japan's market crash (with the mother of all QE in tow) was a surgical hit via bond volatility.  Major USD selling, commodities bid, EUR very bid.  Points to rally.

Thu, 06/06/2013 - 22:20 | Link to Comment MythicalFish
MythicalFish's picture

The bottom is in...

 

DJ FX CHAT: OCBC Targets USD/JPY At 93; Negative Nikkei To Weigh 

Fri, 06/07/2013 - 01:48 | Link to Comment Non Passaran
Non Passaran's picture

Points to inflation rather than rally, no?

I'm short general equities and I'm staying short.
Long various forms of Precious of course.

Thu, 06/06/2013 - 20:55 | Link to Comment rickack
rickack's picture

Connect up the dots going back to November on the S&P 500's daily chart and you'll see at least one reason for a very strong rally to have occurred from Thursday's lows.  If shorts were as unmindful of this chart as I was, it's no surprise they got squeezed as hard as they did.  Still, it must mean something for SPY options to have been quoted more than a billion times in a single day.

Thu, 06/06/2013 - 22:02 | Link to Comment Yardfarmer
Yardfarmer's picture

notice the huge and unprecedented spike right before September 11 on the SPY option trades, mostly puts on United and Amercan airlines stocks undoubtedly .hmmmmm. the ultimate insider trading. I smell something in the wind.

Fri, 06/07/2013 - 06:05 | Link to Comment SmallerGovNow2
SmallerGovNow2's picture

May 2011? bit of a stretch...

Thu, 06/06/2013 - 23:34 | Link to Comment Ban KKiller
Ban KKiller's picture

Rigged much? Free market is long gone...

Fri, 06/07/2013 - 02:07 | Link to Comment broken87
broken87's picture

why the fuck would quotes and BIG ORDERS that are not filled push up the market? And why the hell is the Quote/Trade Ratio increasing so drastically? What is the significance of this event? Thank you for explaining I is stupid

Fri, 06/07/2013 - 06:03 | Link to Comment SmallerGovNow2
SmallerGovNow2's picture

like your name it is completely broken.  a ponzi of epic proportions...

Fri, 06/07/2013 - 06:10 | Link to Comment Bearwagon
Bearwagon's picture

That's at least partly because the market sentiment derives directly from the exchange rates, and pretty much nothing else. So, those who can manipulate said rates (and there are institutions that can), can manipulate the sentiment and thereby the "market". See the significance?

Just my two cents.

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