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Cutting Through The HFT Lies: What Really Happened During The Flash Crash Of August 24, 2015

Tyler Durden's picture




 

One of the fallacies being propagated about yesterday's flash crash, is that somehow HFTs came riding in as noble white knights and rescued the market from a collapse instead of actually causing it. This particular lie is worth a few quick observations and explanations of what really happened.

What did not happen, is what Doug Cifu, the CEO of HFT titan Virtu, the firm which as we have profiled repeatedly in the past has lost money on 1 day in 6 years...

... told CNBC when he said it wasn't Virtu's fault the market did not work for anyone as a result of countless HFT glitches: "we don't cause volatility, as a market maker we're absorbing volatility and we think we soften it."

The most amusing bit was when Cifu said that "we're really just in the role of transferring risk from natural buyers to natural sellers." Considering Virtu and its "special sauce" has never actually taken on risk with its trading record, discussing risk is a little rich for the owner of the Florida Panthers, and here's why: in a note by Credit Suisse's Laura Prostic (the typos are because she is in S&T) we now know precisely what happened:

HFT is typically 50% of overall volm, but they have to walk away in this heightened vol envt, which dramatically reduces liquidity. Hightened vol was mainly unwinding of hedges, not panic.

Anyone who actually trades (and is not part of the Modern Market initiative) knows that this precisely what happens every time there is a spike in market vol: HFTs simply walk away leading to the dreaded "HFT STOP" moment, creating a feedback loop of even less liquidity, and even more volatility, until circuit breakers are finally hit or asset prices hit limits. Yesterday, for the first time in history, not only the S&P500, but the Nasdaq and the DJIA all hit their particular "limit down" triggers.

Credit Suisse also directly refutes what Doug Cifu said: HFTs, far from not causing volatility, merely step aside when volatility surges  thus leading to such stunners as VIX soaring above 50 overnight (with the CBOE too ashamed to even report what it would have been in the first 30 minutes of trading).

This also ties in with the summary in our last night's post comparing the flash crashes of 2010 and 2015:

The good news is that with liquidity inevitably collapsing ever further to a state of near singularity with ongoing central bank interventions, and with markets broken beyond repaid, we will very soon have a repeat flash crash like today, one which will provide enough satisfactory answers to the question of just happened that lead to a market that was completely broken for nearly an hour, and where the VIX was so very off the charts, the CBOE was afraid to show it for at least thirty minutes.

 

One thing is certain though: while the market dies a slow, painful, miserable death, the biggest HFTs will continue pocketing millions. Such as Virtu: "Virtu Financial Inc., one of the world’s largest high-frequency trading firms, was on track to have one of its biggest and most profitable days in history Monday amid a tumultuous 24 hours for world markets, according to its chief executive."

As we previously reported, while Virtu may have fabricated its role in yesterday's events, there was one truth: it had an amazingly profitable day because as a result of the total chaos, HFTs were able to frontrun block orders from a mile away and as a result of soarking bid/ask spreads, Virtu raked in millions by simply capitalizing on the chaos it and its peers have created. As Cifu said then "Our firm is made for this kind of market." We quickly corrected him: "your firm made this kind of market."

But back to the lies: earlier today the WSJ reported the following:

The speed and depth of the drop harked back to the flash crash of May 2010, when program-driven trading produced a self-reinforcing wave of selling. This time around, high-frequency trading firms like Virtu Financial Inc. and Global Trading Systems LLC were buyers that helped U.S. stocks rebound midday from their early slump.

 

“We were catching those falling knives,” said Ari Rubenstein, co-founder of Global Trading Systems.

Actually no. What happened is that in early trading the entire market was in freefall, and the only thing that saved it was the various major market indices hitting their limit down levels for the first time in history - not even during the Flash Crash of 2010 did this happen. The following Nanex chart documents this beyond a doubt.

 

If HFTs did anything, it was merely to frontrun the buy orders once the selling wave - halted thanks to limit downs being hit - had exhausted itself, and the buying scramble was unleashed around 9:35am leading to a 5% move in less than 10 minutes! It was here that Virtu made its colossal profits, however not from taking the least amount of risk, but merely from frontrunning order flow into a stil chaotic market with gargantuan bid-ask spreads, which incidentally not only does not provide liquidity, but reduces it as it competes with other buy offers for any market offers, also known as "providers" of liquidity, only to immediately flip the transaction to those buyers which Virtu knew with 100% certainty were just behind it. In any other market this would be illegal, except for one in which Reg NMS has made such frontrunning perfectly legal (courtesy of billions spent by the same HFTs who now benefit from it).

So what was the real contribution of HFTs: an unprecedented failure of ETFs to trade with their underlying securities and vice versa. As we said yesterday: "for minutes at a time, there was an unprecedented disconnect in ETF fair value as hedge funds sold off ETFs however correlation arbitrageurs were unable to capitalize on the discrepancy with the underlying leading to historic, and extremely lucrative divergences."

Others added:

... experts are still scratching their heads over what may have caused these ETFs to nosedive. One possible explanation is that liquidity providers -- think high-speed traders and other Wall Street firms -- charged with stabilizing the market weren't there when needed. That's what happened during the flash crash of 2010. "When markets get hairy, sometimes those liquidity providers step out of the way to avoid getting run over," said Matt Hougan, CEO of ETF.com.

So while we await for the first clear break of the ETF model, thanks to none other than HFTs, here is a visual example of what really happened: some 220 ETFs which all fell by 10% yesterday!

 

But it wasn't just the "transitory" failure of the ETF model: yesterday the Nasdaq ETF, the QQQ, had its widest 1 minute price swing in history. Yes, the NASDAQ!

 

And just in case there is still any confusion if yesterday's event was indeed a flash crash, the answer is yes, most certainly, as can be seen by the 15% tumble in QQQs right at the open. That, ladies and gentlemen, is the definition of a flash crash.

Again: thank you HFTs.

With that we leave matters into the SEC's capable hands which we know will do absolutely nothing until the time comes when the next marketwide crash does not see a promptly rebound, and the time to finally point the finger at the HFTs comes. It's just a matter of time, plus someone has to be a scapegoat for the real, and biggest, market manipulator in history: the Federal Reserve.

And since, naturally, the complicit and corrupt SEC won't do anything, expect another wave of retail investors to drop out of the market forever and to never come back, having seen yet again what a truly broken and rigged casino it has become.

Finally, while we are delighted that firms like Virtu make outside profits on days in which the market crashes and leads to untold losses for retail investors, we have just one simple request - please don't take us for fools anymore:  by now everyone knows all of your tricks, and can see right through your bullshit.

So, dear Virtu, frontrun whoever you have to, other HFTs, hedge funds, mutual funds, or whoever else is left in this quote-unquote market, and have another Madoff year (one with zero trading losses) but you will have to do it without what was once called the "investing public." They are now permanently gone until two things happen: i) the market is once again a market, not artificially propped up by $14 trillion in central bank liquidity which makes every asset "price" a illusion, and ii) HFT frontrunning is no longer legal, endorsed and blessed by the SEC, the regulators and all law enforcement agencies.

 

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Tue, 08/25/2015 - 14:56 | 6469300 JenkinsLane
JenkinsLane's picture

Bought-and-paid-for bullshit propangda.

Tue, 08/25/2015 - 15:10 | 6469322 nope-1004
nope-1004's picture

Interviewed by Pisani too.... the guy eats this stupid shit up, and blurts what he's told to say.  The station blatantly lies and ignores the truth.  As I've witnessed countless times in the past, they often go to "breaking news" in the middle of an interview when the interviewee brings up the reality of this ponzi and is not playing propaganda by the stations' rules.

He said his firm was  "managing risk and volatility throughout the day"

LMFAO!  You didn't manage shit.  You skimmed off of each trade, whether the seller did so in fear or for minimum loss.  That makes you an asshole!

 

And also:  Thank you ZH and Nanex for exposing fraud, even if it seems no one is watching yet...

Tue, 08/25/2015 - 15:15 | 6469365 kaiserhoff
kaiserhoff's picture

Great summary of the role of HFTs under pressure,

ETFs really blew their cookies.  Quotes as much as 20-50% below last trades on the underlying.  I expect they will try to cover up and make whole those who got caught in that, but if you EVER thought about trading ETFs on margin, time to think again. 

Next time may be the last time.

Tue, 08/25/2015 - 15:32 | 6469448 taoJones
taoJones's picture

Agreed KH... if yesterday showed us anything is that nothing paper/electronic-based is safe.  People who think miners, GLD/SLV, etc are as good as metal need to wake up...

When the bomb eventually drops, and it will, you won't be able to sell at any price

Tue, 08/25/2015 - 15:49 | 6469545 Say What Again
Say What Again's picture

On days like today, I only have one thing to say.  "I LOVE this market"!

Tue, 08/25/2015 - 16:25 | 6469843 nuubee
nuubee's picture

I would think that the VVIX, being at its highest point in history yesterday, would demonstrate that it was the HFTs that were causing the problem. Unless we magically believe that normal human reaction time was responsible for that, which I guess could be explained but in that case the rest of the world would really like to know what kind of performance enhancing drugs those guys are on these days.

Tue, 08/25/2015 - 19:15 | 6470549 Macchendra
Macchendra's picture

That huge gap is a huge weakness.  If it hasn't already been done, someone is working on a bold strategy to monetize that.

Tue, 08/25/2015 - 18:56 | 6470480 Squid Viscous
Squid Viscous's picture

Ari Rubenstein loves this market!! more thieving opportunities, then pretend to be a "force for good" OY VEY!

Tue, 08/25/2015 - 15:36 | 6469463 SoilMyselfRotten
SoilMyselfRotten's picture

Bill O'Brien could straighten this out for us

Tue, 08/25/2015 - 15:18 | 6469380 Nikki Alexis
Nikki Alexis's picture

None of these arrogant criminals will be touched until the entire system collapses

Tue, 08/25/2015 - 16:06 | 6469645 tbone654
tbone654's picture

And then it will be too late for anyone to care... but I hope i"m wrong for a change...

Tue, 08/25/2015 - 16:23 | 6469825 Grinder74
Grinder74's picture

Will you marry me?

Tue, 08/25/2015 - 15:22 | 6469392 Blankenstein
Blankenstein's picture

 

"make a little more money than we lose"  

so a little more money buys this?

 

"Florida Panthers Owner Vincent Viola Selling NYC Mansion – $114 Million"  (Viola cofounder of Virtu)

http://bustedcoverage.com/2013/12/15/vincent-viola-nyc-house/

 

Tue, 08/25/2015 - 15:36 | 6469460 mtl4
mtl4's picture

They don't manage anything other than bid/ask spreads and exploit the difference using trading speed..........funny to hear him try to describe otherwise.  Knowing how bad the Panthers suck and are losing money hand over fist at least makes us feel a bit better about this goofball doing God's work.

Tue, 08/25/2015 - 15:56 | 6469586 Blankenstein
Blankenstein's picture

Here's another video of Cifu and Viola explaining what Virtu does and how they managed to have only 1 losing day in 6 years.  

 

http://www.nytimes.com/video/business/dealbook/100000003632551/virtu-fin...

[Vomit]

 

These douches should be in black and white horizontal stripes instead of pinstripes. 

Tue, 08/25/2015 - 14:57 | 6469303 SheepRevolution
SheepRevolution's picture

I don't know why, but with that look on his face I just want to beat the living shit out of him.

Tue, 08/25/2015 - 15:03 | 6469321 Eirik Magnus Larssen
Eirik Magnus Larssen's picture

The man is the quintessential example of a psychopath who has successfully gamed the system to his own advantage.

Tue, 08/25/2015 - 15:32 | 6469454 asteroids
asteroids's picture

This asshat provides "liquidity" (ie front-runs) on the way up. But, on the way down he runs away like a coward. That's how you get a flash crash. The PPT then becomes the market-maker of last resort and steps in to provide "liquidity". There you have it folks, thats how it works.

Tue, 08/25/2015 - 18:50 | 6470463 redd_green
redd_green's picture

Re"Columbia University: HFT Electronic Front Running Benefits Retail Investors?"

 

what idiot would downvote this one?  Its the damn truth?

Tue, 08/25/2015 - 14:54 | 6469293 Impoverished Ps...
Impoverished Psychologist's picture

HFT is BUILT TO EXPLOIT these moves, not ameliorate them.

 

Wake up world, Skynet is picking your pockets.

Tue, 08/25/2015 - 15:02 | 6469325 KnuckleDragger-X
KnuckleDragger-X's picture

The fix is easy, just put an an automatic 2 second hold on bid withdrawals on the HFT's. IIf they aren't gaming the system, they won't have any problem......

Tue, 08/25/2015 - 15:38 | 6469487 Mr. Bones
Mr. Bones's picture

Pseudorandom 0-2 second delay.  It'd be a shame if the buy/sell processed before the spoof...

Tue, 08/25/2015 - 16:14 | 6469724 tbone654
tbone654's picture

Let's just go back to trading in 1/8th and 1/4s... instead of decimals... or like options, trade in .10 increments... problem solved...

Tue, 08/25/2015 - 14:55 | 6469298 JenkinsLane
JenkinsLane's picture

Jail, jail, jail the HFT execs.

Tue, 08/25/2015 - 14:58 | 6469308 tommylicious
tommylicious's picture

Look at that stupid fucking hair.

Tue, 08/25/2015 - 15:00 | 6469315 buzzsaw99
buzzsaw99's picture

short version: they can front run buying but if they try to front run selling there will be a congressional investigation and possible jail time.

Tue, 08/25/2015 - 15:00 | 6469317 astoriajoe
astoriajoe's picture

Ot: They got another brown person.

http://www.cnbc.com/2015/08/25/jpmorgan-analyst-arrested-for-insider-tra...

At this rate, the market's integrity will be completely restored by Thanksgiving.

 

Tue, 08/25/2015 - 15:01 | 6469320 buzzsaw99
buzzsaw99's picture

yeah, i laughed

Tue, 08/25/2015 - 17:17 | 6470148 RaceToTheBottom
RaceToTheBottom's picture

Is CNBC still a viable concern?

Tue, 08/25/2015 - 15:00 | 6469319 DirkDiggler11
DirkDiggler11's picture

Fuck all of these crooked ass markets, rape them by buying physical Gold and Silver.

Tue, 08/25/2015 - 15:08 | 6469350 TongueStun
TongueStun's picture

JM Bullion got a shipment of 100oz Sunshine bars in today about 1:30, by 2:15 they were sold out. They are now only offering 1 choice for 100 bars, JMs....everything else is sold out. Sunshine 10 ozs have been on pre-order for a month.

 

Silver.com also only has JMs in 100 OZ

Tue, 08/25/2015 - 19:06 | 6470512 Skiprrrdog
Skiprrrdog's picture

Way ahead of you. If it were up to me, every single one of those soul-less criminals would have their berries stapled to a maglev train...

Tue, 08/25/2015 - 15:02 | 6469323 gatorengineer
gatorengineer's picture

Meanwhile back at the ranch the 2:30 ramp kicked in, lets see what they can do with it HFT or not.... I was looking for a flat close today, but it looks like I will be way off.

Tue, 08/25/2015 - 15:36 | 6469475 coast
coast's picture

doesnt look like you were off too much....currently up only 54 points....

Tue, 08/25/2015 - 15:03 | 6469326 FrankieGoesToHo...
FrankieGoesToHollywood's picture

expect another wave of retail investors to drop out of the market forever

BS.  Retail investors are attracted to bubbles; we cant help ourselves.  The next one that arrives, rest assured we will buy high and sell low.  Everyone vowes to quit gambling several times during a single Las Vegas junket.

Tue, 08/25/2015 - 15:09 | 6469351 large_wooden_badger
large_wooden_badger's picture

No worries, the bulls are back in charge! This time it's different! I'm going all in again!!!

/s

Tue, 08/25/2015 - 15:21 | 6469388 vexrizor
vexrizor's picture

That's nonsense. I and many people I know who are retail investors bought low and sold high. It's not hard at all.  The market is predictably cyclical.

Tue, 08/25/2015 - 15:28 | 6469418 FrankieGoesToHo...
FrankieGoesToHollywood's picture

I know a couple who win at blackjack too.  But the Vegas strip is testomony to the fact most lose.

Tue, 08/25/2015 - 18:02 | 6470262 RaceToTheBottom
RaceToTheBottom's picture

"What goes on in Vegas, stays in Vegas"

I thought they were talking about investing money?

Tue, 08/25/2015 - 19:05 | 6470509 FrankieGoesToHo...
FrankieGoesToHollywood's picture

Lol!  "Investing money" has nothing to do with stock market.  trading stocks is like blackjack but no free drinks.

Fri, 08/28/2015 - 09:25 | 6481111 RaceToTheBottom
RaceToTheBottom's picture

Well that is me, the guy walking around the casio not stopping  at any table.  Same with Wall Fuckup Street.  Out of it

Tue, 08/25/2015 - 15:03 | 6469333 saints51
saints51's picture

Bravo Tyler and Nanex. Again this is why I read ZH.

Tue, 08/25/2015 - 15:05 | 6469340 cougar_w
cougar_w's picture

HFT is about sub-millisecond arbing. They could trade fuck out the market -- huge vols -- and leave the tape unchanged. In fact flying under the radar is pretty much Job One with these guys, going along scraping nickles. No I tell you what, this is the usual panic selling and then panic buying. It might be machine-driven and probably is. But it's not what you think, someone playing around at the margins. Nope. Big engines at work here, slamming shit around, shaking out the dumb money, breaking each other. Like sumo wrestlers just taking over and breaking everything in sight.

Seige engines of the market kind.

Tue, 08/25/2015 - 15:27 | 6469415 The9thDoctor
The9thDoctor's picture

Excellent comment cougar_W

The muppets get fleeced when there is blood in the streets!

All of the doomer preppers don't seem to get that basic concept with today's rigged markets. But then again, that's why preppers live in trailers and call cans of beans and an old SKS "wealth". LMAO! Meanwhile the big boys live in mansions and own private helicopters and yachts!

The doomers always chant "wake up" when it is them who actually needs to wake up and understand how this economic system actually works.

Tue, 08/25/2015 - 16:19 | 6469782 Sturm und Drang
Sturm und Drang's picture

Care to elaborate on everything past your first sentence? Sounds like your describing near endpoints of a line (why preppers live in trailers <-> big boys live in mansions) and ignoring the stuff in the middle.

From my vantage point, the economic system doesn't work at all except at the local level. What am I missing that you seem to be alluding to?

Tue, 08/25/2015 - 16:51 | 6470022 Implied Violins
Implied Violins's picture

He seems to think that had we put our beans and SKS money intelligently into the market, we'd have mansions and yachts instead.

I don't buy that theory. He doesn't get that there are only so many yachts and mansions to get, and you can't have one unless you are one of THEM to begin with. And, those beans are going to dry up very, very soon what with global trade turning down and world-wide food production declining.

The only ones able to get those beans soon are those who saved up gold and silver...and bought those SKS's.

Tue, 08/25/2015 - 23:33 | 6471481 wendigo
wendigo's picture

I'm a 'doomer prepper' and I have a nicer house than you, no debt, and more money than you. Obviously I'm doing something right. So fuck off.

Tue, 08/25/2015 - 15:43 | 6469518 Marvin the Martian
Marvin the Martian's picture

good thing nobody is linking up robots to these colossal AI fuckups

Tue, 08/25/2015 - 22:26 | 6471308 ginsu2k666
ginsu2k666's picture

To me HFT is perfectly summed in 'That sucking sound!" The hyper-vacuum cleaner of the markets constantly Hoovering away all the wealth.

Tue, 08/25/2015 - 15:07 | 6469346 Ralph Spoilsport
Ralph Spoilsport's picture

Another example of Virtu Reality on the half-shell.

Tue, 08/25/2015 - 15:07 | 6469347 large_wooden_badger
large_wooden_badger's picture

fucking fuckers fucked everyone fucking dry yesterday

Tue, 08/25/2015 - 15:12 | 6469356 Raoul_Luke
Raoul_Luke's picture

Is it my imagination or does that guy look like an Ivy League educated mobster?

Tue, 08/25/2015 - 15:12 | 6469359 Latitude25
Latitude25's picture

This is why I read ZH

Tue, 08/25/2015 - 15:16 | 6469373 debtor of last ...
debtor of last resort's picture

Awesome reporting ZH. And thanks Nanex, for 'collaborating' .

Tue, 08/25/2015 - 15:19 | 6469383 SSRI Junkie
SSRI Junkie's picture

here here

Tue, 08/25/2015 - 15:23 | 6469399 Deathstar
Deathstar's picture

Got out of the stock market many many years ago because I knew of this fraud.

I started stacking yellow pet rocks instead.

F the fraudsters, the sec, the gov etc. They're all pigs in the same blanket to steal your wealth.

Tue, 08/25/2015 - 15:29 | 6469426 The9thDoctor
The9thDoctor's picture

It's hard to "trade" as a person when you are competing against A.I. bots operating in NANOseconds!

Tue, 08/25/2015 - 19:01 | 6470497 mkkby
mkkby's picture

Back in the late 90s I was actually trading very well.  My setups were profitable or flat 70-80% of the time.  It was nice to be able to trade arca or island and avoid being screwed by the nyse specialists.  But then, something changed. 

More and more I noticed my orders not being filled.  It was obvious something was wrong.  Got out and never looked back.  Too bad crooks always have to go too far and fuck things up.

Wed, 08/26/2015 - 01:09 | 6471645 buzzy_the_pirate_dog
buzzy_the_pirate_dog's picture

Wow, Island.  Cool.  Old School.

Tue, 08/25/2015 - 15:29 | 6469429 dexter_morgan
dexter_morgan's picture

Insider trading is taking advantage of inside information before that information is widely know, correct?

Can someone explain to me how HFT is NOT insider trading?

Tue, 08/25/2015 - 19:04 | 6470504 mkkby
mkkby's picture

It's not insider information.  It's order flow.  Where they are blatantly illegal is with the spoofing.  It is SUPPOSED to be illegal to enter orders not intended to fill.

Tue, 08/25/2015 - 15:31 | 6469446 fainzilberg
fainzilberg's picture

nyse is a snake pit. but soon even the snakes will have wanted to be out

Tue, 08/25/2015 - 15:33 | 6469450 I woke up
I woke up's picture

Does he talk out the left side of his mouth when he speaks the truth?

Tue, 08/25/2015 - 15:33 | 6469457 coast
coast's picture

I am now convinced that august 24 was nothing more than a practice run....they caused it to learn for when it does happen in later september.   I have a question tho, who are you going to sell your gold to when all of this collapses...Do you think your coin dealer will have money?   I dunno but just a thought from what I saw in greece and cyprus.  nobody had any money.  They had to go to another country.   Where ya gonna go?   mexico?  Canada?  etc?

just a thought

Tue, 08/25/2015 - 15:36 | 6469476 I woke up
I woke up's picture

Plenty of people will take payment in gold or silver, why do you think it needs to be converted into fiat before a transaction can take place

Tue, 08/25/2015 - 15:50 | 6469552 coast
coast's picture

I dont think anything, I just ask questions...if you think people will take gold for a transaction then I say maybe.  But who are those people that will take it?   I dont know anyone who would take it.  They might take ammo, food, etc.  but not sure who will give you services for gold or silver when they cant cash it in for fiat...You may be right, but my gut says you are wrong...I dont know anything tho. I just watched what happened in greece and cyprus, the banksters test run.  Know thine enemy or you will be destroyed.

Tue, 08/25/2015 - 15:58 | 6469599 I woke up
I woke up's picture

This discussion is hypothetical but if the SHTF the people that have ammo, food etc know the value of gold and will take it as payment.  Those that don't take it probably have nothing you want or need anyway.

Anyone that keeps any more than the minimum in a bank to pay bills deserves what happened in Cyprus and Greece. 

Life existed before all the financial games and it will exist after

Tue, 08/25/2015 - 16:08 | 6469667 coast
coast's picture

Life existed before, yes.  But we are in a new game that history has no reference to.  This is what upsets me about history articles.  Our history is not our present or our future.  If you think people will take your gold for services, then head on.  I would not take gold for my services. I can fix anything from an electronic device to a vehicle, but I wont trade for gold or silver...I would not know what to do with it.

Tue, 08/25/2015 - 16:22 | 6469817 I woke up
I woke up's picture

I agree this is unprecedented time.  I'm not pushing gold or silver just offering it up as an alternative as a store of wealth because what other alternatives do you have

With your skills/abilities you are further ahead than 95% of the population so you're ahead of most people thru an investment in yourself

Tue, 08/25/2015 - 22:29 | 6471322 ginsu2k666
ginsu2k666's picture

Well, wake up and learn what fiat currency is. 

Tue, 08/25/2015 - 15:58 | 6469603 dexter_morgan
dexter_morgan's picture

Gold/silver is the money - you trade it for goods and services. I suppose ammo could become money also, like cigarettes were during WWII.

Tue, 08/25/2015 - 15:34 | 6469466 Montani Semper ...
Montani Semper Liberi's picture

Are the HFT's stepping away near the close of the market every day now? Below 1600 now, and the DOW could close red for the fourth straight day. 1/2 hour to go, grab the popcorn.

Tue, 08/25/2015 - 15:42 | 6469513 Montani Semper ...
Montani Semper Liberi's picture

Correction. That would make it 6 straight losing days.

Tue, 08/25/2015 - 15:35 | 6469469 Yen Cross
Yen Cross's picture

  Here goes NDQ taking a big fat shit into the close.

 Sell the rips bitchez.

Tue, 08/25/2015 - 15:38 | 6469488 Memedada
Memedada's picture

A Tobin-tax would kill HFT.

Tue, 08/25/2015 - 19:28 | 6470599 HowdyDoody
HowdyDoody's picture

Corporations don't like taxes, but the do like fees.

A Tobin-fee would kill HFT.

 

Tue, 08/25/2015 - 15:39 | 6469497 TheAntiProgressive
TheAntiProgressive's picture

The HFTs were pissed, pissed the stops kicked in to limit the theft they had planned out.

Tue, 08/25/2015 - 15:48 | 6469543 lasvegaspersona
lasvegaspersona's picture

....so.......buy AAPL.....?

Tue, 08/25/2015 - 15:56 | 6469580 Harnar
Harnar's picture

PPT hit the floor at 3:50, wonder when the red team will make thier big play.

Tue, 08/25/2015 - 16:00 | 6469613 Harnar
Harnar's picture

Off the .... Oh

Tue, 08/25/2015 - 16:01 | 6469616 q99x2
q99x2's picture

Chris Martenson says he couldn't trade the markets anymore since 2008. I was knocked out in 2011. The FED will end up owning majority interest in all global corporations before it is over.

Tue, 08/25/2015 - 16:05 | 6469637 Latitude25
Latitude25's picture

Yet the large banks control the FED so they will rule the world.

Tue, 08/25/2015 - 16:31 | 6469881 MauritiusGold
MauritiusGold's picture

They'll start to eat each other once they have eaten everyone else....

Tue, 08/25/2015 - 16:13 | 6469723 Diplodicus Rex
Diplodicus Rex's picture

I have a suggestion to make. If Navinder Singh Sarao wants to ge this own back he should simply publish his formula on how to beat the HFTs at their own game. There will be a tsunami of traders willing to give it a go and the HFTs will die by their own sword. Of course, I could be blowing bubbles (to coin a phrase).

 

Tue, 08/25/2015 - 16:14 | 6469730 MauritiusGold
MauritiusGold's picture

What you on about? I did it from my house in west London with an Algo I bought from the pound shop, and margin I got from a bust company that has close links to a senator in The US, who has 'allegedly' done far worse than me. Come stick me in jail for 300 years you bastards.... Mr Senator hope you are enjoying your summer hols paid for by my commissions.

Tue, 08/25/2015 - 17:00 | 6470067 BurningBetty
BurningBetty's picture

To all those who go Postal around the world shooting innocent. There is so much other good stuff out there to take instead while actually helping the world.

Tue, 08/25/2015 - 17:52 | 6470289 blindman
blindman's picture

Rolling Stones Let It Bleed Remastered FULL ALBUM
https://www.youtube.com/watch?v=xZz0mTb1qtU

Tue, 08/25/2015 - 18:53 | 6470473 redd_green
redd_green's picture

Cool-a-mundo.

Tue, 08/25/2015 - 18:52 | 6470467 redd_green
redd_green's picture

Open season day on hedge fund managers.

Tue, 08/25/2015 - 19:18 | 6470561 withglee
withglee's picture

ii) HFT frontrunning is no longer legal, endorsed and blessed by the SEC, the regulators and all law enforcement agencies.

Laws aren't necessary ... or desired. Just add a random delay to each transaction time stamp and then handle transactions in FIFO order. HFT will have no advantage whatever after such a simple change, and "all" investors will enjoy the elimination of HFT noise and advantage.

 

Tue, 08/25/2015 - 20:18 | 6470712 FoxBud
FoxBud's picture

Why do people believe adding a random delay or a transaction fee will stop HFT's? They have proven to be masters at gaming the system and will create a way to use that against humams as well. Electronic trading was originally embraced by the trading community during the transition from the pits to the screen because of FIFO. Now FIFO has been turned into a massive technology arms race and used completely against humans. The only solution, aside from outlawing HFT's altogether, is to give human traders trading for their own account priority access in the order book at all times

Wed, 08/26/2015 - 08:53 | 6472213 withglee
withglee's picture

Why do people believe adding a random delay or a transaction fee will stop HFT's?

A transaction fee is a bad idea. But a random delay "will" work. HFTs must be able to "slide in at the head of the line". With a random delay, their transactions will be folded into the line. Speed loses all advantage then.

They have proven to be masters at gaming the system and will create a way to use that against humams as well.

They're using the same kind of gaming Rothschild did when he rushed the news of Waterloo back to his traders before it could be generally known. 200 year old gaming secret?

Electronic trading was originally embraced by the trading community during the transition from the pits to the screen because of FIFO. Now FIFO has been turned into a massive technology arms race and used completely against humans.

Unlike the arms race, the transaction race loses all it's advantage with a random delay before FIFO is applied. Remember, this is about "investing". Real investments last more than milliseconds. A random delay levels the playing field yet leaves the market very responsive to "investors". To work, the delay "must be random".

The only solution, aside from outlawing HFT's altogether, is to give human traders trading for their own account priority access in the order book at all times

Not only is that "not" the "only" solution, it's a really bad treatment and not a solution at all. The solution is a random delay of just a few milliseconds. It is simple to implement (requires only a buffer) and it "outlaws" HFT by making it totally ineffective. That's the best way to outlaw things. You don't fix a runaway engine by telling it not to go too fast. You install a governor that makes it impossible for it to go too fast.

Tue, 08/25/2015 - 20:11 | 6470766 gmak
gmak's picture

If it hasn't been said earlier then someone should be locking Waddell & Reed up. How come they're allowed to run rampant over the markets? snicker

Tue, 08/25/2015 - 21:35 | 6471140 jpariz
jpariz's picture

CAN SOMEONE HONESTLY SAY THEY READ EVERY ZEROHEDGE ARTICLE EVERYDAY?  MAKE A GOD DAMN YOUTUBE CHANNEL JESUS 50 PAGES AN HOUR GIVE ME A FUCKING BREAK 

Tue, 08/25/2015 - 22:31 | 6471324 Rock On Roger
Rock On Roger's picture

Mmm. Teevee

 

The book is always better than the movie.

Tue, 08/25/2015 - 21:35 | 6471141 jpariz
jpariz's picture

CAN SOMEONE HONESTLY SAY THEY READ EVERY ZEROHEDGE ARTICLE EVERYDAY?  MAKE A GOD DAMN YOUTUBE CHANNEL JESUS 50 PAGES AN HOUR GIVE ME A FUCKING BREAK 

Tue, 08/25/2015 - 21:35 | 6471143 jpariz
jpariz's picture

CAN SOMEONE HONESTLY SAY THEY READ EVERY ZEROHEDGE ARTICLE EVERYDAY?  MAKE A GOD DAMN YOUTUBE CHANNEL JESUS 50 PAGES AN HOUR GIVE ME A FUCKING BREAK 

Tue, 08/25/2015 - 23:12 | 6471431 kelley805
kelley805's picture

Flash crash could happen again.  Here is a story about one such possibility.

 

http://michaelekelley.com/2012/05/25/flash-crash-epitaph-short-story/

 

Thanks

Tue, 08/25/2015 - 23:20 | 6471452 fowlerja
fowlerja's picture

HFT's create noise, static nonsense, and diversions in order to suck out money in all the chaos and confusion they create...

Wed, 08/26/2015 - 01:04 | 6471638 buzzy_the_pirate_dog
buzzy_the_pirate_dog's picture

We do need to thank Eric for all the good work.

Wed, 08/26/2015 - 09:35 | 6472509 SweetDoug
SweetDoug's picture

'

'

Sat there Monday up at my Mud'da's house, 85 years old, no internut, watching and said, "Can't wait until I get back to the city, to read ZeroHeadge and find out what went on, who was the plunge protection team, et cetera.

Damn right the 'retail investor' is out and not coming back.

Anyone really think anyone over 60 can take a 15% loss in 2 week then watch it all come back, especially with their retirement funds?

 

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