A Reminder Of What Happens When HFTs Decide To Sell

Tyler Durden's picture


Larry Fink told the world this morning that central banks are holding a floor under stock prices (but wouldn't expect to see large price increases) - and judging by the gamma imbalances in volatility-land, they are using options markets to unriggedly manage that implicit put. However, given the utter dominance of the machines in the market and any reaction when real volume hits stocks (always down), we thought, courtesy of Nanex, a gentle reminder of just how quickly the Fed put disappears would be useful in this new "we can never get hurt, valuations are within norms, there is no complacency" normal.


Via Nanex,

This is a supplemental update to (a must read report): Reexamining HFT's Role in The Flash Crash.

Plotting short sale data (Reg SHO) for trades executed on the day of the flash crash, we found several surprises.

1. There were large short sales in QQQQ during the hour preceding the crash. This is the Nasdaq 100 ETF  (the symbol later changed to QQQ).
Each circle represents a short sale in QQQQ, sized by the number of shares in that trade.

2. Another view of the data in Chart 1 above, but includes a histogram (blue) showing the total dollar value of short sales in QQQQ for each second.
Many seconds show $25 million or more of QQQQ shorted, with two seconds showing over $100 million. Most of these occur shortly before, but not during the time the Waddell & Reed Algo was active (14:32 - 14:53). Curious that no mention of this was made in the SEC flash crash report.

3. SPY also had many seconds with high short sales, but not as stark as QQQQ.

4. Total value of short sales each second for NMS stocks between 14:30 and 14:52 along with prices for the eMini (ES) futures contract for reference. 
Note that 14:42:44 stands out as one of the peak seconds - a point we previously identified as the very beginning of the flash crash.

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Thu, 06/19/2014 - 14:49 | 4874748 barliman
barliman's picture


I have COMPLETE faith in the ability of the HFT's to vaporize the Fed put the second anyone in authority shows the least interest in stopping the HFT raping and pillaging of the markets.

Thu, 06/19/2014 - 15:04 | 4874822 max2205
max2205's picture

I remember that day just like JFK got shot day....weird

Thu, 06/19/2014 - 15:31 | 4874926 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

So who got blown out of the water with this one move?

Thu, 06/19/2014 - 15:40 | 4874968 MisterMousePotato
MisterMousePotato's picture

"central banks are holding a floor under stock prices"

Is there any reason why they (central banks) cannot do this, literally, forever?

Thu, 06/19/2014 - 16:03 | 4875046 Jack Napier
Jack Napier's picture

Not explicitly, but implicitly the ability to print money to infinity, which is needed to hold the floor, can go on for as long as the people are willing to use that money. Boycotting the currency for something else such as precious metals or BTC would cause deflation as velocity drops, and subsequently default which is the end result of unabated deflation, and then the floor would drop out.

There is a supposed limit to debt saturation where money printing outweighs its usefulness, but if the people are willing to take on that debt then it can still continue. This would not normally be the case with a national currency, but in the global sense there is no real currency competition that would cause it to hyperinflate since everyone is now doing the same thing to maintain the status quo.

Thu, 06/19/2014 - 16:02 | 4875074 Rainman
Rainman's picture

no .. btw, thank your local congresscritter for the Patriot Act .

Thu, 06/19/2014 - 16:41 | 4875204 moneybots
moneybots's picture

"central banks are holding a floor under stock prices"

"Is there any reason why they (central banks) cannot do this, literally, forever?"


The laws of math.

Fri, 06/20/2014 - 08:59 | 4877465 Baldrick
Baldrick's picture

the senate vote for a full audit of the fed

Thu, 06/19/2014 - 14:50 | 4874751 NOTaREALmerican
NOTaREALmerican's picture

It can't crash until there aren't any shorts.

Thu, 06/19/2014 - 15:05 | 4874826 barliman
barliman's picture



You are correct in one very limited regard but my Grammar Nazi would rephrase it as, "It WILL crash WHEN there are NO short positions." 

It CAN crash in about a million different ways ... or have you read NOTHING of the article or any of the other posts on this topic since ZH came into existence?

Thu, 06/19/2014 - 15:52 | 4875017 CrashisOptimistic
CrashisOptimistic's picture

It's good this article appeared.

This should be studied hard by all the ZH "traders" and "technicians".

There Is No Market.  Get the hell out.

Buy farmland.  Yes, I realize this will call upon you to not sit at your computer, but in 10 years you'll be so much better off in every imaginable way that there is no way not to urge this.

Thu, 06/19/2014 - 16:10 | 4875093 Jack Napier
Jack Napier's picture

You can't fit any worthwhile amount of farmland in a bug-out bag. If you're going to buy land, make sure it's somewhere you won't have to fend off the zombies when their 401Ks are locked and they can't afford a latte.

Thu, 06/19/2014 - 17:03 | 4875271 CrashisOptimistic
CrashisOptimistic's picture

Somewhat the point.

All these city dwellers have to have a place to bugout to.

Farmland far away would be that.  As in 70 miles.  And you'll do that 5 miles a day, casually.  Anything else, and the body will breakdown.

Thu, 06/19/2014 - 17:27 | 4875335 yarak
yarak's picture

So true.  Caught in the treadmill of "I'll make a little more here and then I'll go live in a farm".  Except of course whenever I make more, the farmland costs more.  The oh-so-obvious explanation is that I'm not really making sh*t, 'cause everything that's worth buying is going up more.  

So much education and such a late spark.  It's not as if I didn't see it coming, too.  My undergrad econ profs were already talking about this debt exponential curve 20+ years ago.  At the time, I bought a bunch of krugerrands in the enthusiasm of youth in the $300s, and advised those who'd listen about the fiat bs.  

When Bitcoin appeared, I thought it might one day scare the bejeezus out of TPTB (into some monetary discipline), but of course they'll just outlaw it and make an example of a few resisting heroes and that'll be that.  

Thu, 06/19/2014 - 14:50 | 4874755 Blackfox
Blackfox's picture

Off topic but I just read the headline in the UK's Telegraph and spat beer all over my keyboared.

'Iraq crisis: Isis jihadists 'seize Saddam Hussein's chemical weapons stockpile'



Fucking joke?

Thu, 06/19/2014 - 14:51 | 4874764 LawsofPhysics
LawsofPhysics's picture

So, the "weapons of mass destruction" are back?  Sheep really are fucking stupid, < shocker >

Thu, 06/19/2014 - 15:33 | 4874934 insanelysane
insanelysane's picture

Obama's crew is going to make sure they are "found" this time because he knows the sheeple are too stupid to think, well they weren't there when we went in years ago but they somehow showed up after we have occupied the country for a decade.

Thu, 06/19/2014 - 21:57 | 4876136 BringOnTheAsteroid
BringOnTheAsteroid's picture

Post moved to correct thread

Thu, 06/19/2014 - 14:57 | 4874786 Skateboarder
Skateboarder's picture

I was sad to see that the article failed to mention that the jihadists also found Unicorns and tore apart their guts for the skittles. Fucking heartless bastards.

Thu, 06/19/2014 - 14:59 | 4874802 ParkAveFlasher
ParkAveFlasher's picture

They have enslaved Oz and must be stopped!

Thu, 06/19/2014 - 15:00 | 4874805 Blackfox
Blackfox's picture

Haha +10

Thu, 06/19/2014 - 14:58 | 4874793 Dr. Engali
Dr. Engali's picture

We need Colin Powell to give another speech and show us proof.

Thu, 06/19/2014 - 16:00 | 4875064 NotApplicable
NotApplicable's picture

Or as Vlad called it, "dish detergent."


Thu, 06/19/2014 - 14:59 | 4874795 NoDebt
NoDebt's picture

No. Fucking. Way.


Here we go again.

Thu, 06/19/2014 - 15:16 | 4874877 lasvegaspersona
lasvegaspersona's picture

So Bush was right all along. 

Now we need to make sure we can slip them into Syria through Libya (of course) so we can balame Assad for war crimes.

At least we now know that Saddam really was a bad man. Did they find the mobile bio labs yet?

Thu, 06/19/2014 - 16:09 | 4875024 Cthonic
Cthonic's picture


Pre gulf war site that is probably nothing more than a toxic junk yard now.

Thu, 06/19/2014 - 14:52 | 4874765 venturen
venturen's picture

Is this like Obama Red Line? It is there till it isn't. What happens when Wall Street breaks the system again. There is no "downside" for them to manipulate the FED for profit. It is an out of control criminal gang at this point with no chance of prosecution! 

Thu, 06/19/2014 - 14:56 | 4874773 buzzsaw99
buzzsaw99's picture

anyone dumb enough to run a large sell order through the exchange deserves to be outcast. [/sarc]

Thu, 06/19/2014 - 14:55 | 4874777 undercover brother
undercover brother's picture

how dare they sell.   serves them right for getting face ripped.

Thu, 06/19/2014 - 14:56 | 4874785 Dr. Engali
Dr. Engali's picture

It's going to be something to see the expressions on people's faces when we go from S&P 2000 to S&P 400 before they can get the word sell out of their mouths.

Thu, 06/19/2014 - 15:01 | 4874810 NoDebt
NoDebt's picture

The story in the Wall St. Journal the next morning will start off like this:

"In less time than it takes for the average human being to blink their eye......"

Thu, 06/19/2014 - 15:08 | 4874830 potato
potato's picture

How many olympic swimming pools is that?

Thu, 06/19/2014 - 15:21 | 4874898 lasvegaspersona
lasvegaspersona's picture

Dr. E 

worry more about S&P 60,000. At 400 they can just crank it up again. At 60,000 we will have arrived in Zimbabwe.

Thu, 06/19/2014 - 14:59 | 4874801 Banker Buster
Banker Buster's picture

Why aren't the Nanex people involved in the Senate hearings on HFT?

Thu, 06/19/2014 - 15:00 | 4874808 ParkAveFlasher
ParkAveFlasher's picture


Thu, 06/19/2014 - 15:09 | 4874841 Banker Buster
Banker Buster's picture

Ok I'm back, for a moment there I was in a world were the truth matters.  


I don't know how the hell I got transported there, but glad to be back in fantasy land.  I see mr. yellin is fed, obummer is pres. and s&p is 1950, and a unicorn just jumped over my desk, yep I'm back.

Thu, 06/19/2014 - 15:17 | 4874842 Dr. Engali
Dr. Engali's picture

Two reasons. 1) The senate denizens are fucking stupid. 2) You are assuming they want REAL answers to what is going on.

Edit: did I mention the fact that the Senate denizens are fucking stupid?

Thu, 06/19/2014 - 15:05 | 4874827 lasvegaspersona
lasvegaspersona's picture

The lunch break for algos is limited to 15 nano seconds. Any algos found to be in violation will be recycled into subatomic particles and will not be allowed to participate in bonuses.

Thu, 06/19/2014 - 15:11 | 4874852 Al Huxley
Al Huxley's picture

That was undoubtedly the most adrenaline-filled 30 minutes I've ever spent watching the markets - I was lucky enough to be holding a stack of SPY puts at the time and cashing them out was like hitting the fucking lottery - I was afraid they would reverse the trades, the prices were so out of whack. 


Fortunately, the intrepid regulating bodies have put the necessary controls in place to prevent this kind of madness from happening again...

Thu, 06/19/2014 - 15:20 | 4874895 NoDebt
NoDebt's picture

I know.  I've become just as thankful for central planning the last few years as you have.  Remember when investing was considered difficult and involved the risk of loss?  Glad those days are over.

Thu, 06/19/2014 - 15:46 | 4874994 Bemused Observer
Bemused Observer's picture

"That was undoubtedly the most adrenaline-filled 30 minutes I've ever spent watching the markets"...Well, I'm glad it's entertaining you. The only activity I've been seeing from this stock market here has looked more like Granny leaning to the left to fart. I don't think that means she's ready to get up and run.

Thu, 06/19/2014 - 15:57 | 4874996 notquantumdum
notquantumdum's picture

'Almost the same thing happened for me.  I had some puts on RSP (even more fantastic than on SPY at the time), but I wasn't really paying attention due to trying to buy some BPT and KMP (I think it was), after the washout at the bottom, and I totally forgot about the RSP puts!  What a colossal mistake!

I'm sort of glad I never saw just how much the puts went up to -- because RSP cratered much more than SPY, so much so that my trade would have probably been canceled if I had sold the puts (I want to say RSP lost more than 90% of its value before the bottom trades were canceled for only about a 50% intraday crash after the cancelation).  I was better off not knowing just how much money I had failed to cash in on.  Nevertheless, I sold the RSP puts a few weeks later for a fairly decent profit, and I locked in 5% selling the BPT and KMP less than 24 hours after I bought them (not long after the washout at the bottom).

I know a lot of heartbreak for a lot of people happened on that day, but I can't help but look back upon it as a very exciting [if not quite fun] day for me.  I'll certainly never forget it.

I would rather the flash crash had not happened than make those profits, but I have made it a sort of standard practice to generally always be long a few puts on something, in case it happens again.  ['Lucky thing I haven't actually been net short equities, despite these puts, though!]

Thu, 06/19/2014 - 15:14 | 4874866 I Am Not a Copp...
I Am Not a Copper Top's picture

Here comes the RAMP (doo doo doo doo)
Here comes the RAMP, and I say
It's all RIGGED

Thu, 06/19/2014 - 15:20 | 4874894 firstdivision
firstdivision's picture

Any idea who the lucky son of a bitch that got a short-sell executed ~$48.10@1:25pm

Thu, 06/19/2014 - 21:17 | 4876239 nanex
nanex's picture

Walk the price to the left and when it joins with the other trades, that's when it really executed. It was reported late - because people don't need to know these things right away..

Thu, 06/19/2014 - 15:23 | 4874901 SMC
SMC's picture

"Larry Fink told the world this morning that central banks are holding a floor under stock prices..." Translation: SELL MORTIMER SELL!!!

BTW - Listening to Nomi Prins on Keiser Report, well worth the time.

Thu, 06/19/2014 - 17:41 | 4875359 The Econ Ideal
The Econ Ideal's picture

We don't need HFTs to crash a rigged, overinflated market - it will happen in time, over time. Ponzis are not perpetual. 

Fink is an amusing character. He's been out trolling the financial media with his warnings for the last few months, getting his position on record regarding the "fragility" of the markets, including ETFs, all the while enjoying the illusion of a "perpetual" upside, and not completely dispelling the myths. Impaled by the fence. 

Thu, 06/19/2014 - 18:26 | 4875540 Born2Bwired
Born2Bwired's picture

so anyone figure out who wanted to buy 90 handles down which was the bottom before the flash crash happened? this is in the first 25 seconds of the audio...




i'm sure they were just lucky to guess the coming crash and bottom point..

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