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The Trades That Broke The Nasdaq
During the first minute of trading on January 27, 2014 there were wild price swings in at least 11 stocks: symbols BKH, GEB, HAYN, UBSH, WSBC, FLIC, EFF, GABC, BBOX, SP and TPZ. We know this because about 90 minutes later, Nasdaq canceled trades in these symbols citing the clearly erroneous transaction rule 11890(b). However, as Nanex shows in its usual great (and imperceptible to the SEC) detail, these trades appear anything but erroneous... we can only imagine who the market-maker algo belonged to that the Nasdaq canceled all of these trades...Goldman?
Un-Clearly Erroneous
During the first minute of trading on January 27, 2014 there were wild price swings in at least 11 stocks: symbols BKH, GEB, HAYN, UBSH, WSBC, FLIC, EFF, GABC, BBOX, SP and TPZ. We know this because about 90 minutes later, Nasdaq canceled trades in these symbols citing the clearly erroneous transaction rule 11890(b).
Pursuant to rule 11890(b), NASDAQ, on its own motion, will cancel all trades executed between 9:30:00 and 09:31:00 that were 10% or greater from the prior day’s consolidated close for the stocks listed below. This decision cannot be appealed. MarketWatch has coordinated this decision with other UTP Exchanges. The stocks affected are as follows: "BKH" at or above $58.66, "GEB" at or above $23.29, "HAYN" at or above $57.26, "UBSH" at or above $26.37, "WSBC" at or above $32.08, "FLIC" at or above $44.70, "EFF" at or above $20.13, "GABC" at or above $31.41, "BBOX" at or above $31.30, "SP" at or below $23.03 and "TPZ" at or above $27.88. NASDAQ will be canceling trades on the participant’s behalf.
Looking closely at the trade and quoting action, we can't help wondering how (other than by price) these trades were clearly erroneous. The trades were within the NBBO (National Best Bid/Offer) which means the highest bid and lowest ask from any of the 10 stock exchanges. Do we need more exchanges? Or is there another problem here?
1. BKH Trades and NBBO (National Best Bid/Offer) spread.
Starting about 2 minutes before market open, the ask prices (sell orders) start walking up from $53.85 all the way to $88.20!
2. BKH Bids and asks color coded by reporting exchange and NBBO.
Ask prices from multiple exchanges all march higher!
3. WSBC Trades and NBBO (National Best Bid/Offer) spread.
The Best Ask was significantly higher, and the best bid was significantly lower just seconds earlier.
4. WSBC Bids and asks color coded by reporting exchange and NBBO.
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Efficent market theory.... i agree with what nanex does.. what i do not agree with is the fact this shyt happens every single week and no one ever is punished despite millions upon millions of dollars changing hands. http://hedge.ly/1mSVe2I
"I spend 98% of my time wallowing in anxiety over the 2% worst possible events" -LB GS
L.B.- 'What....me worry? I get free do-overs, shikzas!'
These are the top five owners of Nasdaq
Top 5 Holders
INVESTOR AB 19,394,142
VANGUARD GROUP INC 7,479,693
FMR LLC 7,038,576
MASSACHUSETTS FINANCIAL SERVICES CO /MA/ 6,583,286
GOLDMAN SACHS GROUP INC. 5,450,701
Read more: http://www.nasdaq.com/symbol/ndaq/ownership-summary#ixzz2rdaMIhtB
Investor AB is a Sweden-based investment company with a senior advisor, CLAES DAHLBÄCK, who is also a Director of Goldman Sachs International.
That should explain it.
Claes Dahlback has been member of the board of Goldman Sachs since 2003. Which means Nasdaq belongs to GS. Right?
http://www.nndb.com/people/585/000127204/
You guys keep talking about markets. What the hell are those and what do they look like?
imperceptible to the SEC.... Justin Bieber and Midget porn are more important.
skynet?
Oh to have the perks of the squid. It must be nice to get do overs in the market.
overrated
CLEARLY erroneous! But if they had gone up wildly, that would have clearly NOT been erroneous and not cancelled.
Wish I could get a do-over every time my fat finger got me in trouble.
wink-wink, eh guvna?
Do people still bother to follow this fucked up criminal enterprise, ala the Greatest Racketeering & Ponzi Scheme, second only to pure fractional fiat reserve banking (which enables the former), that the sheeple have been taught to call "the stock market?"
WTFBBQSAUCE BITCHEZ??!!!
So let's see if I understand this, If I do a trade because in my judgement it is a good trade, but the exchange doesn't like it, the trade is pulled and I get my money back? Do I get my money back? When? And does this mean that I am only allowed to kep my lousy trades? According ti what the exchange thinks?
And fergawdsake how can any institution operate a policy where it acts on its own motion and there is no appeal? It is always the appeal process that safeguards everyone from tyranny.
it's a rule. I would't call it unfair if it applies evenly to everyone.
but yes, fees would be reimbursed (but not the opportunity cost).
Maybe we should call the article:
The trades that Showed how the nbbo and Everybody but NasDaq is Broken.
To me the key here is in the time: 9:30, or just at market-open.
While I agree rescinding orders seems odd at the start of the day
one can only suppose they are trying to correct imbalances made
manifest during the pe-open auction phase.
Now NasDaq is quite strange, in that it does auctions like nobody else.
During their open-cross and close-cross, the continuous trading book
stays active, but a separate auction trading book publishes dynamic
price and size information from dealers and market makers. In it
there's a number of prices and sizes there, but the key is that they
gradullay narrow closer into the main order book. At each pass it
approximates bid and ask by looking at the largest matching pair,
and then narrows these two closer together by 10% each way.
In theory this provides better price discovery during auctions.
now I'm not smart enough to support or disprove that claim,
but it looks to me that the 10% criteria may highlight a snag in
regulations in that the open-cross mechanism reflected a more
liquid price and thus better than the nbbo. Note that as NasDaq
is the only exchange doing open-cross, this is quite possible.
Look at the nbbo bid-ask spread for wsbc: 2.92 to 184.56: that's two
orders of magnitude, and is absolutely ridiculous. basically dealers
are trading blind in the morning and have no idea how to price these
stocks, so they're setting ludicrously conservative limits. the dynamic
Nasdaq quotes come out at 95.20, which is at least in the same order
as 30.89. It looks to me like NasDaq calculated a much fairer price,
but the rest of the world didn't catch up.
The problem is this better price violated their own stated 10% rule.
and so they had to pull the trades. To me there's nothing unfair
at work here: the rules were openly published, and unless one
can point out that they were applied with partiality in this case
and leniently ignored in another there's no reason to cry wolf.
But maybe this demonstrates that the rule should be scrapped?
like the article points out, the prices were well within the spread.
Instead of just comparing a flat percentage of the best bid/ask,
maybe we could compare to the spread or its standard deviation?
Also, I'd like to question how NasDaq let the trades go through
in the first place. It can't be that hard to check a 10% threshold?
I'd be curious to know the order types and volumes of the trades,
and if any of these were carried over from the opening cross book.
imho nobody's actively trying to cheat any investor, big or small, here.
the nbbo was invented to make things more fair. classic open and
close auctions were also invented to improve fairness and liquidity,
and finally open and close crossing auctions are yet another attempt
at improving fairness for all participants. but as is the case with any
kind of innovation, not all markets work the same way, regulations
and rules often lag behind, and this causes divergences and arbitrage
opportunities while all segments play catch-up with one another.
LOL free markets. So if I put in a crazy lowball bid and hope it gets hit at some point, the exchange will cancel my order? It will also cancel my order if I put a ridiculously high sell price and hope some dumb ass buys it?
This is like Venezuela. No you can't sell your TV for ____ bolivars and hope some retard buys it. It's too expensive! You must lower your ask price!
bingo....and by the way...if a stock is trading at $50 and you put in a buy order at $44 that is NOT a crazy lowball bid.
It all depends on who accidentally SOLD it to you at $44. If it's a VIP then your trade may bet cancelled. Sure, you'll get your $44 back, but the stock's now trading back above $50, so your entire purpose for the order at $44 is void.
Thou shalt not lose when ye do godz "bidding"
"ask" the lord and all your evil "bids" shall be undone.
So sayeth da lord.
Im no expert but I trade the market everyday and this shit is SOP.
the squid always gets a do over. 30000 days straight without a trading loss bitchez. trade the Qs and YOU LOSE.
Maybe trades should be cancelled after couple of months if stocks don't go up enuf - I mean just for the big guys like GS etc. Run it by LLoyd will u? "Don't you know who we are?"
We need a 10 cent per share tax on all trades. That would end this stupidity. Trading billions of shares for no purpose but to roil the market is STUPID. Try roiling the market with a 10 cent tax. The money could go torward destroying the scams.
note I hate taxes....but there has to be an opportunity cost to pumping and dumping in todays market.
The taxes would go up and up, until they hit about 75%, but the Rothschild cartel would be exempt.
We should make a law against selling stocks. That way the price never goes down (or up).
Or we could just pretend to trade stocks using pretend money like Monopoly...er uh, I guess we are already doing that, huh?
The HFTs coupled with the exchange rules can lead to incredible mind fucks and head fakes.
I hear that Google is experimenting with 'Google Fat Finger' its a program that'll wipe out all of your financial info by first wiping out all of your finances.
LoL! Do overs! Even the cassino doesn't pitch a bitch when they lose and demand a do over! Fuck the market, what a joke!