Just One Question About Yesterday's Last Minute "Berserk ETF" Freak Out

Tyler Durden's picture

With 4 seconds to the close of yesterday's epic trading session, someone executed over $200 million and 1,147 trades in SPY - the S&P 500 ETF - in one-second, lifting the price to a S&P level of 2,130. This massive-loss-making "fat-finger" - resulting in millions of losses - would normally be followed by "probes" from the exchange into "erroneous trades" and then rapidly accompanied by the exchanges busting all the losing trades. But not this time! In all other cases of fat-finger'd and busted trades, we have learned who the counterparty was - even Goldman Sachs was exposed after regulators DK'ed its busted trades several years ago. So, the question is - why hasn't the other side of yesterday's berserk "fat-finger" buying spree in SPY spoken out in anger that its massive money losing trade will not be DKed?

And just who is this mysterious, money-losing yet completely blaze counterparty.

With 4 seconds to go in today's "market" day-session, this happened in 1 second:


Then we get the normal follow-up:


But... then... an odd thing happened...




So why would the massive losing counterparty on these far out of the money trades not come forward? Complain? Explain? And who can afford to swallow losses on that scale so easily.

As we suggested yesterday, probably because the Fed is willing to "eat" the losses rather than explain why it buys SPY, via Citadel, on DirectEdge.

Think that's just conspiracy theory wonkishness? The BoJ do it openly and publicly... The ECB have admitted it as a possibility... so why not the central bank uberlord, The Fed?  What would that reality do to the "free market" assumptions of The US Capital Markets where even the USA Today now blasts "Fed to the Rescue"?

Caught Fed-handed? We'll never know.

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hedgeless_horseman's picture



Other side...lol...as if there are still two sides to every trade!

How positively quaint!

HedgeAccordingly's picture

Well the perps of these anomalies make so much $$ the fines for their actions mean nothing to them.


hedgeless_horseman's picture




Masturbatory quotes and trades are totally legal, and profitable!

BuddyEffed's picture

Could it be that the trade was essentially a wash trade for the parties involved?

Except that it wouldn't be a wash trade for those exposed to short coverings, would it?

I'm guessing here and I'm at the limit of my understanding on this.

Jeff the Terrible's picture
Jeff the Terrible (not verified) BuddyEffed Dec 19, 2014 12:43 PM

Does the FED still own the Red Roof Inn or were they able to sell it?



Jeff the Terrible's picture
Jeff the Terrible (not verified) BuddyEffed Dec 19, 2014 12:43 PM

Does the FED still own the Red Roof Inn or were they able to sell it?



KnuckleDragger-X's picture

When you can create a the money you need with all push of a button you don't worry about covering your losses.

nakki's picture

I believe that the "Market" is so rigged that the FED along with the last 4 major banks do WASH trades all day long while taking the "Market" higher and selling of part of the stocks they hold. If you're a "BANK" you get shares for free through IPO'S and from free cash thru ZIRP and QE. After the next Crash more free money to buy shares 50-60% lower than today. Rinse Wash Repeat. So if JP was short from 2000 and Goldman Sachs long, Goldman buys 2120 from JP and all gets washed around 2060. That might sound crazy but in today's world ??

Fun Facts's picture

“The Fed has now taken upon itself a third remit, which is the administration of American equity prices.” - Jim Grant

Debt-Is-Not-Money's picture

"...major banks do WASH trades all day long..."

Did the FED learn from Enron, or did Enron learn from the FED?

Crash Overide's picture

I say who gives a shit, keep stacking. :)

Just Take It All's picture

I'm confused with all of these overlapping hedges.  Are we hedged accordingly, or are we hedgeless?

Aw horse shit, just take it all!

smlbizman's picture

i cant believe hedged got edge from hedge for first....thanks hedge glad to see hedge finally edged...maybe hedge will get the hint now and leave the hedge

calltoaccount's picture

Banks Are Allowed to Deduct 75 Percent of Fines Imposed by Justice Department 
Lynnley Browning, Newsweek 
Browning writes: "A big chunk of the hundreds of billions of dollars banks have paid in settlements to various federal agencies and regulators since 2010 is deductible from the taxes banks and lenders pay." 

Eireann go Brach's picture

Tyler. I hope you tweeted this to the "dickhead" at the Fed so he can answer you?

Al Huxley's picture

Well fuck it, I'm going long now at 206 and putting my sells in at 212.  I like my chances!

Philo Beddoe's picture

Mr. Huxley has set the price. 

NoDebt's picture

I 'heart' central planning!

This has been the best 5 years of my entire career. 

Philo Beddoe's picture

Worst five for my career. However, I have a new kid and my wife is getting hotter for some reason. So, on balance I am level. 

Meme Iamfurst's picture

Al...Baby..., how do you know what is real and not?  It is like trying to catch light in a glass jar and save it for a rainy day.


I'll remeind all the short bets ( IF there are any left ) that NO BANK has to cover any short if they are in the loosing lane on that bet....thank you George Bush Excutive Order still in effect from 2008.

Al Huxley's picture

Well, I figure there's no risk.  Even if I can't get rid of it today, I'll be deep in the money by end of next week latest.

Bullionaire's picture

K-Hen to the rescue!

101 years and counting's picture

luckily the Fed is able to just absoorb these losses and pass them back to the taxpayer.  it is conveniently hidden in the money the fed gives back to the US Treasury every year for interest payments US taxpayers paid the Fed for printing money to buy US debt.  confused?  i dont blame you.  now, explain how this is NOT a ponzi scheme......

wmbz's picture

Yes, This "free market" trading is a sight to behold. Wonderous!

Can you imagine what it would act like if it were rigged?

Richard Chesler's picture

Easy print, easy go.


jldpc's picture

You know, I know, and they know who did it? But what none of us know is why? Can Fed employees make mistakes? Of course they can. Was it a mistake? Hmmmmmm. Not likely if by mistake you mean pushing the wrong keys on the keyboard. But maybe whoeverwas instructed to do it, neveronce thought about whether the other side of the trade was really liquid. Appears not. So for me the more important question is who profited from the trade at such elevated levels - and were the ywaiting in the bushes for it based on advance knowledge? Who? Who? Who? made money on this deal?

Rainman's picture

Why you axing all them questions ? Make a statement !


LooseLee's picture

Likely the same Cretins that profited from puts on AA on 9/11.

SheepDog-One's picture

Just mash the buy button all day at the Fed....if it's profitable then keep it....if it's a loser, taxpayer picks up the tab.

Meme Iamfurst's picture



PEPSI SYNDROM.....melt down.....Nature abhores a vacuum, these trades are a vacuum and one day chaos, out of control chaos. 

If the North Koreans can get into our computer systems, they will get into the market computers too.

Ricky Roma's picture

Hilarious.  Now the algos have a target to retest.  Maybe the fed accidentally showed their price target for 2015.  Annual high still showing 212. lol

chart_gazer's picture

thats the 2014 year end target. watch the low volume melt up start monday.

jubber's picture

doesn't really expain why Dow and S&P futures went mental 9 hours later at 6:15 GMT when they hit 17910 2079  explain that one, did FRBNY buy the futures there as well?

DavidC's picture

Spot on, I wondered that this morning when I came down and looked at my charts...a WTF.


jubber's picture

Yep a lot of people who shorted after hours, subsequently got killed later with 100 more Dow points up their arse

NoWayJose's picture

I would have been very happy to sell $200 million - especially right after a big two day gain.  Then I could sit back and enjoy NOT being in the casino over the Christmas holidays!

seek's picture

The Fed is more attached to the idea of plausible deniability than it is to losing millions.

Just Take It All's picture

We wealth effected some folks.

chart_gazer's picture

its their mark to show everyone where they are going to manipulate the market to.  they will not have losses. no one can stop them, been going on for 6+ years.  just buy SPXL , UPRO, calls in SPY etc and watch your fiat money grow. only risk--black swan event.  don't dis me, just an observer and the messenger. the doom can't be allowed to happen.

Comte d'herblay's picture

U won't be dissed for your highly accurate post.  

If I hadn't run into this site, 5 years ago, I would be at the Isle de France beach bar in St. Barth's eating langouste, Salade Nicoise, and pommes frites with a permanent Zonker tan, Planter's punch, and getting ready for my party aboard my 200 foot yacht, "SUCKAS", sailing, and overnighting in St. Lucia with Mick Jagger for company.

J B T F D.

This sweeetest, shortest, most lucrative advice EVER given, and free of any charges, fees, subscriptions or other ripoffs.

To all those who have optimistically done this, never looking for the bear, congratulations and may the wind be always at your back.

As nothing else could, this advice has proven once and for all that the world looks down and  smites with great vengeance upon the unbeliever, the pessimist, and all the triple ETF short funds.

And rewards the Optimist with Midas like riches, lotsa nookie, and you can do it as a Republican, democrat or independent. Even Commies can get rich.  

LooseLee's picture

A fool can see what they are doing. Only a Soul-less Criminal Pinko Fascist Commie would even think of profiting from it. Remember what team you are on. Your actions define you.

Xanthias's picture

I usually see these strange massive SPY (the chart above is off by a decimal) spikes up and down during AH.  I always assumed it was option-related, e.g. someone buying cheap out-of-the-money options, banging the ETF, and somehow reaping a profit in a nanosecond while they were in the money.  Once when I brought this up with a broker, he dismissed it as a bad print.  Not helpful.  Can anyone explain what's happening?

DavidC's picture

Yes. It's called manipulation. It's called fraud. It's called using taxpayers' money when they are on the hook, ultimately, for any losses that are made.


One And Only's picture

Does the FED still own the Red Roof Inn or were they able to sell it?

tahoebumsmith's picture

Cause its a Ponzi and when the ponzineer does it everything is fine, anybody else there would be an investigation unless your Jon Corzine of course

debtor of last resort's picture

Another awesome zh report. Central banks, destroyers of worlds.