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And This Is How You Spike Markets In The New Normal

Tyler Durden's picture




 

Because when you have no POMO, and no QE on the horizon, you can always break a stock exchange and send the entire market... higher!?

  • *CBOE HAD 2ND PERIOD OF ISSUES W/ QUOTE DISSEMINATION TODAY

To wit: "The CBOE did not disseminate quotes between 11:45am CDT and 11:48am CDT in the following classes- DEM, DENN, DEPO and PCLN. All systems are operating normally."

And the result:

 

 

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Tue, 11/04/2014 - 14:30 | 5411315 mtndds
mtndds's picture

I dont get it.  If a market breaks how does that send stocks higher when it reopens?

Tue, 11/04/2014 - 14:34 | 5411352 TruthInSunshine
TruthInSunshine's picture

Maybe you should be asking (a) what happened that preceded the "market" "breaking," and (b) what REALLY happened to the quotes, asks & bids during the time the "market" was "broken," for starters.

Tue, 11/04/2014 - 14:51 | 5411419 CrazyCooter
CrazyCooter's picture

C'mon guys, relax ... nothing bad can happen until after the elections!

Regards,

Cooter

Tue, 11/04/2014 - 15:16 | 5411538 Headbanger
Headbanger's picture

But what's that growing rumbling sound?

The stampede for the exits??

Tue, 11/04/2014 - 14:37 | 5411359 FlyinHigh
FlyinHigh's picture

I was asking myself the same question.

 

Tue, 11/04/2014 - 14:43 | 5411384 TruthInSunshine
TruthInSunshine's picture

Print MOAR electronic yen and buy MOAR DEBT, Kuroda-san!

http://headlines.ransquawk.com/headlines/japan-s-gdp-declines-for-the-fi...

News Headline Summary

Japan's GDP declines for the first time since April, according to Nikkei

- Japan's gross domestic product for September likely dropped 0.3% on the month in real terms, falling for the first time in five months, the Japan Center for Economic Research said Tuesday.

Update details:
- As a guide, Japan's next GDP announcement is scheduled on the 16th of November. 

Print 18:16 - Economic Commentary - Source: BBG

Tue, 11/04/2014 - 14:51 | 5411420 aVileRat
aVileRat's picture

TD should do a refresher on how market exchanges work. In the meantime

- Flash to exchange your thousand orders a pico-second.

- Before exchange gets those orders in the book, send cancel orders

- Market begins to fill those orders, which end up vanishing as soon as they are posted

- Sudden stall of volume leads liquidity algos to notice the spread is starting to widen and they too start to flash and send up large order quotes

Do steps 1 to 4, loop.

While that is going on, (1 to 4) other exchanges are pushing volume, and see the large burst in exchange activity, so that price becomes the volume-price. Feeding on 4.

That continues until the links can no longer keep up with the large volumes of quotes/bids. Like a good old dns attack, something breaks. Usually a standard NYSE glitch comes down to a platform desynching from the global volume price and needs to step out of the market since the volumes of phantom quotes are so stupidly large vs. what network programs were designed (in UDP architecture) to process, based on the network protocol standards drafted in the 70's.

SO when the market breaks, a bunch of orders continue to be sent, but they never cross; so the most active (manually traded) dealers will move the price based on their own local books. This is done from your own price quotes, and as such may be wildily different than the global price, since manual traders do not have access to the central order book which includes the dark exchanges and speed switches.Which is why you see global drift, and then gravity engages once people get the master-book back online.

While that break happens, algos and speed traders can do whatever they want, since local exchanges are printing tickets which may very well be 10bps wide from where the real volume-price tape is crossing at. Theoretically taking advantage of this arb. is illegal, as a human, but many will buy when exchanges break/misprice.

Which is why one should never market-order when exchanges go down. And it's getting more frequent, which means liquidity algos are being taken manually offline due to risk and volatility limits pushing them out of the market. Like 89.

 

 

 

Tyler, re: tracking on the internet (and those funky sidebar ads)>

http://recode.net/2014/11/03/reading-a-newspaper-vs-reading-news-on-the-...

Tue, 11/04/2014 - 14:55 | 5411428 dracos_ghost
dracos_ghost's picture

+1.

Good job on the explanation.

Tue, 11/04/2014 - 15:17 | 5411541 FlyinHigh
FlyinHigh's picture

Thank You.

Tue, 11/04/2014 - 15:21 | 5411559 TruthInSunshine
TruthInSunshine's picture

+3 AVR

Tue, 11/04/2014 - 15:32 | 5411614 mtndds
mtndds's picture

oh ok, thanks.

Tue, 11/04/2014 - 15:37 | 5411628 Bryan
Bryan's picture

It sounds like you know what you are talking about.  Unfortunately, we don't know if you know what you're talking about.  :-)

Tue, 11/04/2014 - 16:15 | 5411787 Xibalba
Xibalba's picture

Danke

Tue, 11/04/2014 - 18:04 | 5412199 UggSmash
UggSmash's picture

Interesting description - thanks Rat. 

It got me thinking: could much of this stock market levitation over the past few years be caused by:

(1) HFT quote-stuffing to pump bids, +

(2) Regular, mindless buying by sheeple (i.e. 401k and other retirement accounts on autopilot), +

(3) A lack of a serious reason to sell (e.g. huge GDP/earnings misses, epic economic news, etc.)

(4) Endless buybacks help too

Retail participation has declined, volume is low. I wonder (no evidence yet) if nearly all of the volume/bid is coming from 401k (autopilot) + buybacks (desperate to improve EPS, even leveraging to do so) + whatever the Fed and other CBs are doing? Is there data available to compare the magnitude of CB printing (or buybacks, or annual 401k contributions), to the change in S&P market capitialization? (i.e. which components contribute the most to S&P levitation?)

If I'm on the right track, then to get a significant market decline, one or more of the following must happen: 

(a) Some significant news development that takes 401ks off autopilot, getting them to actually think critically about reality

(b) Failure in buyback growth (I thought we saw this to some extent, reported by ZH recently)

(c) CBs reducing their invovlement in the game (that one seems tough to determine -- is Fed QE really over, or is it going through a backdoor somewhere?) 

Tue, 11/04/2014 - 19:13 | 5412403 KittyStix
KittyStix's picture

Then someone hit Crtl-Alt-Del and reboots the system.

Tue, 11/04/2014 - 15:39 | 5411638 debtor of last ...
debtor of last resort's picture

Ekm1 summed it up rather nicely; it's a video game, just drag that bitch up with your mouse.

Tue, 11/04/2014 - 14:31 | 5411318 astoriajoe
astoriajoe's picture

Maybe if my computer breaks my boss will give me more money!

Tue, 11/04/2014 - 14:31 | 5411319 astoriajoe
astoriajoe's picture

weird double post.

Tue, 11/04/2014 - 14:35 | 5411323 ekm1
ekm1's picture

NY Fed is the only buyer. NSA and central command can't handle the whole thing and need a break.

 

Until the order comes to let it fill the black hole

Tue, 11/04/2014 - 14:39 | 5411374 Market Rage
Market Rage's picture

Agree.  It seems like they are absorbing the supply until the price stabilizes.  Then they continually spray hundreds of small lot buy orders into the futures market to achieve the price objective.  

Tue, 11/04/2014 - 14:47 | 5411399 ekm1
ekm1's picture

Until the order comes to let it collapse

Tue, 11/04/2014 - 14:33 | 5411329 ebworthen
ebworthen's picture

So if the exchange is broken value goes up - got it.

In other words, the exchange needs no pricing to ramp up.

Tue, 11/04/2014 - 14:32 | 5411331 kaa1016
kaa1016's picture

Come on, are you fucking kidding me? I saw the market spike and wondered which Fed asshole said what. But it's this shit again. 

Tue, 11/04/2014 - 14:33 | 5411340 Dr. Richard Head
Dr. Richard Head's picture

"That's pretty", squeeled the Squid.

Tue, 11/04/2014 - 14:34 | 5411341 Central Wanker
Central Wanker's picture

When in doubt, BUY!

Tue, 11/04/2014 - 14:36 | 5411354 Bill of Rights
Bill of Rights's picture

So its election day hmm lets see who my choices are

 

Democrats: Jews

Republicans: Jews

Decisions decisions.

 

Who Controls the Economy? | Who Controls America?

Tue, 11/04/2014 - 14:47 | 5411400 FreeShitter
FreeShitter's picture

Jews?

Tue, 11/04/2014 - 14:57 | 5411435 Baby Eating Dingo22
Baby Eating Dingo22's picture

Dumb ass

Tue, 11/04/2014 - 15:53 | 5411701 SMG
SMG's picture

So its election day hmm lets see who my choices are

 

Democrats: Luciferian Oligarch Puppets

Republicans: Luciferian Oligarch Puppets

 

Winner: Lucifer!

Tue, 11/04/2014 - 15:27 | 5411589 Hammerabi
Hammerabi's picture

That chart has the S&P up 3 points or around 0.15%. . . just a little context

Tue, 11/04/2014 - 16:39 | 5411909 FuzzyDunlop21
FuzzyDunlop21's picture

Yes but everytime this happens, which is probably every other day on average (and twice today alone) assets get misspriced. even if you assume a 50% correction when everything is back online, 1.5 points x 252 trading days a year / 2 (every other day) and you get 189 points of bullshit, right about 10% of current S&P.

Obviously this is back of the envelope, I dont know if it really is every other day. However I also know 1.5 is very modest compared to other days when theres more drammatic action during breaks. Not too mention the circlejerk algos respond to the instant 3 point rise by thinking theres momentum so they buy

and well my point is no matter what amount, it happens often enough that it will result it the market being priced incorrectly. Of course who gives a shit at this point anyway

Tue, 11/04/2014 - 15:57 | 5411728 Madcow
Madcow's picture

15 more years of economic implosion and commodity price collapse is now apparantly bullish - 

 

 

 

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