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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 | 3631437 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 | 3631449 CrashingDollars
CrashingDollars's picture

>hard to say that it was just equities alone

It was magic

Thu, 06/06/2013 - 17:16 | 3631458 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 | 3631470 Aguadulce
Aguadulce's picture

Better levitator:  Criss Angel or the S&P?

Thu, 06/06/2013 - 17:45 | 3631513 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 | 3631559 AldousHuxley
AldousHuxley's picture

Putin divorces wife

Russia is America

America is Russia

Thu, 06/06/2013 - 18:24 | 3631566 jbvtme
jbvtme's picture

TD...great post

Thu, 06/06/2013 - 18:39 | 3631592 Manthong
Manthong's picture

A market is a terrible thing to waste.

Thu, 06/06/2013 - 20:41 | 3632013 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 | 3631574 Glasnost
Glasnost's picture

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

Thu, 06/06/2013 - 19:01 | 3631642 RockyRacoon
RockyRacoon's picture

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

Thu, 06/06/2013 - 18:30 | 3631580 stocktivity
stocktivity's picture

It's all Bullshit!!!

Thu, 06/06/2013 - 17:18 | 3631451 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 | 3631438 jcaz
jcaz's picture

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

Thu, 06/06/2013 - 17:24 | 3631473 YC2
YC2's picture

this is a dog with a deceptively strong tail

Thu, 06/06/2013 - 19:16 | 3631686 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 | 3631442 ParkAveFlasher
ParkAveFlasher's picture

These charts look like Maria B's false eyelashes.

Thu, 06/06/2013 - 17:14 | 3631444 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 | 3631461 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 | 3631474 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 | 3631544 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 | 3631557 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 | 3631573 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 | 3635572 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 | 3631585 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 | 3632528 Pareto
Pareto's picture

"Bernspank"  he he.

Thu, 06/06/2013 - 17:15 | 3631446 _ConanTheLibert...
_ConanTheLibertarian_'s picture

Inverse flash crash!

Thu, 06/06/2013 - 17:15 | 3631447 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 | 3631516 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 | 3631665 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 | 3635423 MeelionDollerBogus
MeelionDollerBogus's picture

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

Thu, 06/06/2013 - 17:15 | 3631450 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 | 3631554 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 | 3631453 Cult of Criminality
Cult of Criminality's picture

Hmmm

Thu, 06/06/2013 - 17:21 | 3631468 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 | 3631480 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 | 3631492 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 | 3631547 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 | 3631555 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 | 3632243 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 | 3632262 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 | 3631504 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 | 3631478 SPAREPARTS
SPAREPARTS's picture

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

Thu, 06/06/2013 - 17:40 | 3631503 trippy64
trippy64's picture

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

Thu, 06/06/2013 - 18:55 | 3631629 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 | 3632345 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 | 3632522 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 | 3631506 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 | 3631553 A82EBA
A82EBA's picture

Yes, Thank You

Fri, 06/07/2013 - 17:42 | 3635403 MeelionDollerBogus
Thu, 06/06/2013 - 20:35 | 3631991 gonetogalt
gonetogalt's picture

Best to lurk quietly, spareparts.

Thu, 06/06/2013 - 21:05 | 3632105 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 | 3631499 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 | 3631508 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 | 3631661 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 | 3631979 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 | 3632127 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 | 3631521 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 | 3631552 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 | 3632425 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 | 3631523 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 | 3631567 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 | 3631541 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 | 3631670 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 | 3635393 MeelionDollerBogus
MeelionDollerBogus's picture

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

Thu, 06/06/2013 - 18:08 | 3631545 JSD
JSD's picture

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

Thu, 06/06/2013 - 18:22 | 3631551 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 | 3631579 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 | 3631572 Hongcha
Hongcha's picture

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

Thu, 06/06/2013 - 18:29 | 3631576 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 | 3631584 ebworthen
ebworthen's picture

Reality must not intrude upon perception!

Thu, 06/06/2013 - 18:35 | 3631588 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 | 3631628 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 | 3631688 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 | 3631792 omi
omi's picture

And nothing to do with 1600 level?

Thu, 06/06/2013 - 20:04 | 3631851 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 | 3631951 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 | 3632353 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 | 3632719 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 | 3632061 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 | 3632290 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 | 3632864 SmallerGovNow2
SmallerGovNow2's picture

May 2011? bit of a stretch...

Thu, 06/06/2013 - 23:34 | 3632551 Ban KKiller
Ban KKiller's picture

Rigged much? Free market is long gone...

Fri, 06/07/2013 - 02:07 | 3632734 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 | 3632863 SmallerGovNow2
SmallerGovNow2's picture

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

Fri, 06/07/2013 - 06:10 | 3632867 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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