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A Step By Step Guide How To Crash The Entire Market
While we already noted that the CFTC and the DOJ have gone full scapegoat retard, by blaming the entire flash crash on one solitary trader (operating out of the UK no less), which means that Waddell & Reed should now sue the SEC for hundreds of millions in lost fees and defamation, it is worth re-emphasizing the hubris and the audacity that these "regulators" have, to assume that sophisticated market participants are truly dumb enough to believe any of this is just shocking.
In any event, going with the bullshit story concocted by the confused brains at the CFTC (whose former head when all this happened, is now being groomed by Hillary Clinton to be America's next Treasury Secretary), and for all those who wish to follow in the "rogue" ES trader's footsteps, here is how Navinder Singh Sarao singlehandedly crashed the entire market, leading to the single biggest loss in market capitalization in history.
From the charging document:
Defendants aggressively used both the Layering Algorithm and the 188/289-Lot Spoofmg strategies on May 6, 2010, the 2010 Flash Crash day.
Defendants first turned on the Layering Algorithm at 9:20a.m. CT, placing four orders, totaling 2,100 contracts. These orders were each one tick apart, starting three ticks from the best ask. The orders were modified 604 times over the following six minutes so the orders were always at the third level of the sell-side of the order book or deeper, and then canceled with no executions, as the Layering Algorithm was turned off. While the first cycle of the Layering Algorithm was active, the E-mini S&P price fell39 basis points.
While the first cycle of the Layering Algorithm was active, Defendants bought 1,606 contracts and sold 1,032 contracts.
Defendants' use of the Layering Algorithm and the 188/289-Lot Spoofing intensified throughout the day. At 11:17 a.m. CT, Defendants turned the Layering Algorithm on for more than two consecutive hours, until 1 :40 p.m. CT. During this cycle, Defendants utilized the Layering Algorithm to place five orders, totaling 3,000 contracts. A sixth order was added at around 1:13 p.m. CT, increasing the total to 3,600 contracts.
These orders represented approximately $170 million to over $200 million worth of persistent downward pressure on the E-mini S&P price and, over the next two hours, represented 20-29% of the entire sell-side of the Order Book. The orders were replaced or modified more than 19,000 times before being canceled at 1 :40 p.m. CT. At that time, the Order Book was severely imbalanced and Defendants' 3,600 Layering Algorithm orders were almost equal to the entire buyside of the Order Book. In total, the Layering Algorithm was on for over four hours and 25 minutes on May 6, 2010.
In addition to the Layering Algorithm, Defendants aggressively utilized the 188/289-Lot Spoofing which intensified the Layering Algorithm's effects. Between 12:33 p.m. CT -1:45 p.m. CT, Defendants placed a total of 135 orders with 188 or 289 lots on the sell-side of the Order Book, totaling 32,046 contracts. Ofthese 135 188/289-lot orders, 132 orders were canceled without resulting in execution.
Between 11:17 a.m. CT and 1:40 p.m. CT, Defendants' actions contributed to an extreme order book imbalance in the E-mini S&P market. This order book imbalance contributed to market conditions that caused theE-mini S&P price to fall361 basis points.
During this two-hour period, Defendants traded 62,077 E-mini S&P contracts with a notional value of$3.5 billion.
On May 6, 2010, Defendants caused an artificially low price to exist in the lead month of the E-mini S&P contract.
So now that you know how to crash the entire stock market single handedly, please do. Because this is not a "market." As we said in July 2010, "It's Not A Market, It's An HFT 'Crop Circle' Crime Scene."
And finally, this:
In addition to the Layering Algorithm, Defendants frequently manually "flashed" large-lot orders in a variety of lot sizes in the Order Book that were quickly canceled with no intention of these orders resulting in trades. At times during the Relevant Period, the Flash Spoofing was used with and to amplify the impact of the Layering Algorithm. At other times, Defendants' Flash Spoofing was used alone to benefit Defendants' trading strategies
In other words, 5 years after Zero Hedge first explained precisely what happened on May 6, 2010, the CFTC finally admits that the flash crash was not due to Waddell & Reed, but due to HFTs and quote stuffing.
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And the North Koreans are also reading this.
Scarry! We are doomed!
what a crock of utter bullshit this is. What a farce our country has become. Not a single person working in Washington DC deserves to have their job or to "serve" anyone in any capacity except perhaps as someones bitch.
I'd say that as long as people are dumb enough to use phrases like "our country" then each and every scumbag in DC deserves to have the job to serve them, good and hard.
what phrase would you use as sub ?
This is such bullshit. This one guy in London caused the flash crash. Get the fuck out of here. How do you make an elephant disappear in a crowded movie theatre? Misdirection...
If 100,000 middle class families that have $10,000 in banks withdrew their cash on the same day, that's $1B. Would that be enough to annihilate all the leveraged debt chains on the planet? My bet would be on 'yes.'
(perhaps I'm off in the order of magnitude. If anyone's got an accurate estimate, that would be most interesting to see)
This one is so short you don't even have to measure it.
Definitely not a keeper.
pods
One rogue trader can smash Emini.... lmao.
Oh and just FYI, tomorrow at 2pm EST I will smash Emini cuz I figger what the hell, I can beat this guys' score!!!
So they're accusing this guy of market manipulation by spoofing, but he executed 67k contracts in one day? Sounds like actual buying and selling to me.
But how, exactly, does putting bids/offers out move the market? Who's buying and selling based on the depth of the spoo book? Is it other algo's OR dare I say it....could it be.... central banks? Are his market manipulations just making central bank market manipulations too difficult?
Sure will be interesting to see whether and how spoofing and market liquidity changes now that they've unveiled this case. Maybe after they're done, the only one left trading e-mini's will be central banks.
The hilarious part is the lack of coverage of any other days when their algo was running, or a comparison between other days. When I saw this story on Drudge i thought it was too stupid for ZH to print... until i read the hilarious details above.
HFTs around the world are puckering up.
hard to imagine jurors agreeing to say guilty.
Bingo!
Anyone who would be naive yet capable enough to do just that would almost certainly be inviting a drone strike for providing material support to terrorists if it were in fact carried out.
Unless they worked for a hedge fund on Wall Street that is...
"what phrase would you use as sub ?"
ask Lord Blankfeind....
This country
fair enough
Amen
At the rate of one conviction every 5 years we should have the rest of these HFT market manipulating bastards put away in about 60 thousand years. Just in time for Fukushima to cool off.
CME + CFTC = complicit stooges
"It's Putin's fault" is all I'm waiting for. /sarc
Seriously... What surprises me, is that if the Russians or Chinese military hackers wanted to crash the US/UK markets, they presumably could have done so by now -- by doing exactly the kind of 'perfectly legal' thing described here. That, plus using a few other tricks.
OTOH, if I were them and wanted to do this, I'd wait until just after we announced that our (Russian and Chinese) currencies will be backed by Gold. You then let loose the "cyber-hounds of hell" in tandem, for a double-barrel effect. But that's just 'devious me'.
I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.globe-report.com
interesting timing of the decision to adress the cause of crash
looking at the dates, I'm guessing they were going to run out of time to file charges, and wanted to put some sort of result to "justify" years of watching midget-porn and grooming-for-their-next-job.
Wtf is his leverage?
Indeed. It is absurd on its face.
Think of the leverage used by the London Whale on behalf of the Morgue on some of those upside down trades.
"A Step By Step Guide How To Crash The Entire Market"
Actual:
1) Keep rates at zero for more than 10 years
...done.
Think it was Bill Burr who said that if terrorists really wanted to destroy the American Economy, they'd be taking out mortgages instead of flying planes into buildings.
And all those other HFT algos that cancel trades thousands of times a second are perfectly legit?
only if they are TBTF or already approved by crony capitalist standards. ie, corzine and buffett would be allowed to do this.
They have bought a "license" from politicians to do their manipulation.
This poor Singh guy didn't make his contribution.
Feds should just say they had a big red "that was easy" button that they pressed multiple times...
"being groomed by Hitlery" - any video coverage on that?
https://www.youtube.com/watch?v=ZfSx8BG-Gy4&t=1m0s
It's always the small fry they go after, and get...
"Market", that's some funny shot right ther. I don't care who you are. We don't have Mark's, we have a policy tools.
Explain how 3600 contracts to buy/sell in the E-mini qualifies as "manipulation"?
It's complicated.
Because they said it is. No more questions. The matter is dead.
It only takes 3600 contracts??? This market is even shittier than I thought.
Exactly. How the fuck does swining a few hundred million cause a market worth at least a thousand times to crash? Harken back your memories and remember the boyz burning almost at least that much to rip the face off the bears during the last seconds of a trading session. Nah, the "boyz" removed stepped back for whatever reason and "liquidity" disappeared, thats why it went into free fall. It was glorius.
He is that retail investor they've been talking about against the tbtf bull HFT bot spoofers in what a glorious bull market this has been.... Yea except that day...
That's what happens when u set up a trade to grab lows these days.....
that trick is only for the licensed against disruptors.
Look at how many billions the Fed had to throw into futures last October to crank things around in the other direction. It seems that 'down' is cheaper than 'up'. Curious
What's even more amusing? When the CME went from non- profit to a for profit entity, they completely abandoned the concept of maintaining an honest price discovery, and a fair market- it became all about volume and money- they give central banks special rates for their business. The question is- do they only care about up volume, and not down or selling volume? Have to have sellers on the other side of the trade, do you not? What's the problem? Kevin Henry taking a crap that day?
And which FCM allowed him the leverage to do this?
Most likely MF implodable
lasers are so pase, we need something that can trade faster than the speed of light
working on it.
http://en.wikipedia.org/wiki/Faster-than-light
Well, not me personally...........
Yea because in college when they were trying to shove that nothing is faster than speed of light shit down my thought I was like to myself going but those explosions off the sun just came at me faster than the speed of light.... Idiots!
Get help.
All the Russian, North Korean, Iranian or Chinese (so many out there) hackers have to do is get into a few of the HFT systems and set software up to swing the markets several hundred points each way and trigger other trading systems to try and front run them.
Cause a cascading effect. That would shut down the markets.
What a sight that would be.
Flash Crash was an experiment at the Central Command as to what would happen if the system was left to function by itself.
Baloney. Watch the Wall St Code.
https://www.youtube.com/watch?v=kFQJNeQDDHA
Wall Street code clearly implies Central Command
Maybe I misunderstood you.
If you are referring to the William Dudley, NYFED and the BIS as "Central Command", I would agree with that term.
gang of 8
http://en.wikipedia.org/wiki/United_States_Intelligence_Community_Oversight
"The Gang of Eight consists of the Senate and House Majority and Minority Leaders, and the Chairs and ranking members of the House and Senate Intelligence Committees"
That is laughable to think those stupid assholes in the US gov't are running the show.
WTF?
Either the government is oppressive or useless
Take a pick. Can't be both
The world is so interdependent these days. See how Lebanese hash is being sold to both sides of the war! Still! War goes on and the marijuana fields keep producing.
If "terrorists" destroy something they find out later that one of their bosses owned part of the destroyed target, ha-ha. But they don't care as they have wealth elsewhere. Like twin towers or building 7. Always, always about the money.
Oligarchy/Plutocracy 2016!2+2=5
For what it's worth. I seriously believe the government is going to try to use this case to further takeover the markets. Like they already haven't I know. They just need to sell the rest of the public on their 'good intentions'.
WTF is going on at Walmart? “There Are No Stores in Denver Metro Open Past Midnight” – Employees
Apparently articles about high frequency trading also attract high frequency posters.
WTFRLY - ZH member for over 2 years, yet all he does is pump his online tabloid by posting 5-30 copies of site-linked headlines in a span of 3-5 seconds.
Here are some other flash crash articles.
http://michaelekelley.com/2012/05/25/flash-crash-epitaph-short-story/
http://michaelekelley.com/2012/08/03/wall-street-crash-could-happen-again/
Enjoy!
This guy must have really pissed in the wrong guys Dom and coke piles.
Harmonic motions took down the Tacoma Narrows Bridge.
Might have the same effect in the markets. Did they test for that?
Well with enough tightenings as to only inject stimulus they will have plenty of time to stress test those harmonics reverberating through the system.... might really get the currency waves going..... making them do more than just back flips.
In the tech crash... On the sell out it was a trip as the downs in the market started curving back in time to give u crescent moon shapes .... That was some trippy stuff!
Nothing like divergence...... Mmm mm mmmm it is right up there with quandary economics!
No, no, no says the CFTC, you're looking at it all wrong. It wasn't harmonic motions that was the problem, and it most certainly was not the splendid design and engineering work that went into that most fabulous bridge. It was that damn air blowing over it that was the problem! And now we know the culprit. After years of investigation, we have found the kid who had the gale (er, gall) to be blowing out the candles of a stolen birthday cake right in the vicinity of our precious bridge. He shall pay for his crimes!
straight to the 'lectric chair
Lord how times have changed!! 3600 contracts? Don't trade much anymore - but back in the day - 3600 contracts would trade about every 30 minutes. This piece of shit is in worse shape than I imagined
Was it just me or did I just read that as the CFTC admits HFT manipulates markets??
Individual Investors were allowed to trade up to 5000 contracts if they had the pockets
Got this off drudge. (Man I don't miss that about my x mother in law ~ she would do it in a real snotty manner though ... Because she was only thinking ur full of shit and I am going fuck u over every chance I get since I am a bitch and that is how I care.)
http://dailycaller.com/2015/04/20/does-hillary-clinton-suffer-from-uh-hu...
3000 E-minis caused some stocks to go bid less? Bullshit.
Fastest way is an unlucky, unscheduled and unplanned for broken arrow event that will just simply finish the job Fukushima started. Right near the nest of sensors in California to trigger the silos to open and launch without people over rides. That would be my first guess to solve the world's issues with money. Just get rid of all the people. Not like anyone really wanted a solution anyways. They just wanted to be validated. Besides everyone spent all that money and time on those weapons systems.
Might as well use them because why else would anyone build so many of them.
That would be a waste.
I thought you hd to be in New Jersey to beat the speed of light.....this guy was in England...and in his home doing this....I am jelous....I would bet Waddle and Reed would like an apology.....I love to listen to the people defend the HFTers...still......add liquidity you know....they take your money right out of your hands....that is the liquidity they add....this market is so screwed..but gold and silver are still down...
Who the fuck WANTS to be NJ?
You can sit on beach in SE Asia and run algos, as long as the server is located at the right data center in the Shithole State, and you can VPN into it...
The guy that figured out where all those front-running HFTs exist.
Spread Networks to shave millisecond from Chicago to NJ spent $300 million to shave 3 milliseconds. Amounted to 10s of billions profits.
Where all the cables are laid out.
The plumbing or fiber optics that comes from the exchanges.
BATS exchange.
http://www.cbsnews.com/news/is-the-us-stock-market-rigged/
Somebodies have lost their "shorts" so a tool has been removed that has proven very unprofitable for them, and very so for the longs:
to wit, from my broker:
"The CME Group recently announced that it will discontinue trading in other standard-sized, pit-traded stock index futures products following the expiration of June contracts on June 19, 2015. In connection with this announcement, optionsXpress will cease trading in standard-sized S&P 500 futures and futures options".
17. Nav Sarao Futures Limited PLC is a private limited company incorporated in the United Kingdom with its principal place of business in London, England.
That would be Public Limited Company, not private.
So butterfly wing wind waves can cause a tsunami!
If they beat fast enough that is.
Maybe in 4-5 years we'll find out who flash crashed the USDX a few weeks ago?
The timing of this is interesting. The issue was certainly far in the past for even die hard traders. None of whom would ever believe such nonsense as factual. I'm inclined to believe some sort of flash crash 2.0 is coming. And they are laying the groundwork to blame some HFT firm.