When It All Goes Bidless: What Losing $1 Billion In 100 Milliseconds Looks LIke

Tyler Durden's picture

It's quiet out there; too quiet. But if you were watching carefully this morning, everyone's favorite government-subsidized bank - Citigroup - flash-crashed to the tune of a $1.2bn market-cap loss in a fraction under 100 milliseconds. A 1.3% micro-crash on absolutely massive volume so perfectly visualized thanks to Nanex. When does this 'liquidity-providing' fiasco stop?

 

August 27, 2012 at 10:27:50.900 Citigroup (symbol C) dropped 1.3% (from 29.80 to 29.42) in about 100 milliseconds.

1. One second interval chart showing trades color coded by exchange.



2. One second interval chart showing best bids and offers color coded by exchange.



3. One second interval chart showing all bids and offers color coded by exchange.



 

The following chart shows trades and bid/ask spreads for one of the reporting exchanges. ISO trades are color filled, while all other trade conditions are empty (white). Note, trades from NY-ARCA (red) began dropping about 20ms before NYSE (blue) where the price fell apart

 


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yogibear's picture

Good! Bot against Bot. The loosers blow up.

Jack Napier's picture

It would be more entertaining if they gave each algo a Rock'em Sock'em Robot body.

HoofHearted's picture

C has been warned. Keep screwing around, and we'll do this for real!

strannick's picture

ZH. Keeping score. For the record.

malikai's picture

HFTs are not liquidity providers. HFTs are liquidation providers. Please update your records appropriately.

francis_sawyer's picture

The reason I never really got into BITCOIN (or any shit like that), is because in the end it seemed to me like the 'bitcoin miners' could just set up computers & steal shit at will...

This pretty much is the same thing...

malikai's picture

I'm a big fan of bitcoin. But I don't partake as of yet. The ultimate problem I have is that they are fiat, no matter how constrained.

How would the miners steal at will? Are you aware of their function and how they get paid?

Check this out if you haven't already: http://www.weusecoins.com/mining-guide.php

Miners use hardware and electricity to 'generate' coins and provide the cryptographic services required for transaction processing. They have to actually 'work' to get coins, unlike our overlords at the central banks.

francis_sawyer's picture

All I've done is glossed over it...

I'm not really talking about the 'price discovery' aspects (there seem to be some merits with respect to that)... My problem is when I saw all these addicts setting up multiple computer servers, which, from what I gathered in my brief audience, were basically just using the servers to mine coins...

WTF is that all about?... & if that's the case when something is small peanuts (like bitcoin is)... What would happen on a LARGE scale when the REAL THUGS came to town...

My point is... N-O-T-H-I-N-G is fail safe... Crooks will always find a way to infiltrate the system & steal from you... With that in mind ~ I'd rather make HARD ON THEM... In the end, I can handle a bunch of barbarians swinging poleaxes, maces, & tridents... I just don't want no dweeby little shit wearing a yamulke & eating a kosher 'hotpocket' while sitting in an air conditioned room stealing from me...

redpill's picture

Of course nothing is fail safe, and obviously bit coin has had its share of scandal.  However, it when it comes to thuggary, there is no one worse than one Federal Reserve.

francis_sawyer's picture

Surely the 'non'-Federal 'non'-Reserve has taken the art of the thievery to new heights...

But as for BITCOIN, let's just call that 'latent', or 'kinetic' thuggery at this point... The worse thing it could ever do is to get sophisticated...

Turin Turambar's picture

IMO physical gold is fail safe.  When all goes to hell, you've still got the gold.  Oh yea, 100% reserve commodity currency is the way to go.  No fraud (fractional) banking allowed.  It's really not that hard people.

Dr Benway's picture

NOTHING is fail safe, NOTHING is 100%, and you are doing yourself a disservice by not realizing this.

Turin Turambar's picture

Yes, and the limit of 1/infinity = 0.  I get it hypothetically speaking.

In a world where gold is no longer a store of value, your life span will be a function of how much food, water, and bullets you have.  Does that clarification make you feel better?  ;-)

malikai's picture

I think I see what you're saying. If someone decided to put up a supercomputer or other large scale miner in order to destroy it. Well, I don't know if Shitoshi was thinking specifically about that but there is a pretty good couple of couters to that.

  1. Mining becomes 'harder' as the pool of miners or collective 'mining power' grows. So there are diminished returns for bringing on a big parralel fpga system online and it would just about be cost prohibitive, from my perspective.
  2. The production curve for BTC somewhat resembles hubbert's curve, except far more steep on the decline side and fixed by time. So this means that as time goes on, far fewer returns exist for large scale miners, diminishing their ability to get a large market share.

Caveats do exist, however. Regarding #1, early adopters are in a significant advantage, meaning they could move the market, quite easily. But as time goes on and they take profit (redistributing coins), their individual shares decline. Regarding #2, the vision is that as the production curve declines, mining purpose switches to focus on fee-based transaction processing. This means that large scale transaction processors could gather enough coins to do damage. But again, they are restricted by the same laws that apply to #1.

1 BTC is $11 right now, from about $7 in July. Last year's illiquidity bubble put them in the $30s. They flash crashed last year after a few months because a whale on GOX got his password cracked (due to GOX being weak security-wise and the whale's poor choice in password), but they have been grinding higher ever since and liquidity continues to grow. I lost the coins I had been playing with on GOX at the time during the flash crash.

Personally, I think BTC is an excellent case study in a modern truly free money market. I plan to put a few models on it at some point. I'm very much interested in seeing what I can find through that.

francis_sawyer's picture

@malikai

At this level (which is tantamount to AMOEBA level) on Bitcoin... I'm as fascinated as you are... But then I just think of the way things ALWAYS go...

Think of it this way... In 1913, I'm SURE that there were at least a few well minded folks that thought the Federal Reserve was a good idea... On that note, I'm sure that the original THIEVES (who, could in no way imagine the technologicalk advancements to come) could not have possibly dreamed that their thievery could reach such incredible heights...

Things are dynamic, they evolve, they morph... I can't imagine BITCOIN would ever escape the criminal aspects that befall any wealth accumulation scheme...

This thred deals with theft of billions in milliseconds (I couldn't help but recall the ongoing threads on co-located systems on high speed fiber optic & telecom lines between NY & Chicago)... It leads you to God knows where... Real estate in Cleveland?

Anyone around here schooled on 'prism optics'?... If so, you'll get my point...

malikai's picture

Yea, that opra feed is a monster. We used to run one to our Jersey colo. The hardware on either side cost us millions, not even including the feed or licensing. It never made sense to me why it was necessary to spend so much money on so much bullshit data. To me, the whole feed seemed like 99.99% bullshit, 0.01% useful data.

Anyway, who knows where btc will go. Either way, I'm watching it closely. I don't think it will become the next fed, not by a long shot. To me, what's interesting is seeing how the btc organism copes with crisis and adapts to its environment.

The Big Ching-aso's picture

 

 

Excessive masterbotion.     They'll get hairy CPU's & then go HAL 9000 blind.

Turin Turambar's picture

Per Mises Regression Theorem, money originates from a commodity.  Money isn't just an idea that somebody came up with and everybody adopted.  If so, then where did the valuation and prices come from?  Out of thin air?  No.  They would have to be arbitrarily created, and as such, it's similar to a fiat currency and will inevitably fail.  Some people try to be too clever for their own good; yet, cleverness does not allow one to disregard the laws of economics, ... e.g.  FED.

blunderdog's picture

Bitcoin is NOT "fiat."  It is not legislated as a legal currency in any way.

XenoFrog's picture

The bitcoin environment is filled to the rafters with scams and schemes. Bitcoiners tend to have a split personality where they want to promote their "alternative currency" by saying, "get in early! before the value explodes!" and yet at the same time advertise it as a stable alternative. It cannot be a stable alternative as well as a way to get rich quick so long as you get in early.

 

Most of the bitcoins are held by a few big players, it's impossible to cash out of any significant number of bitcoins without crashing the market, and the only real use for the coins is for purchasing drugs and other illegal things off silkroad.

If you want to mine your own bitcoins, you will use more electricity and wear down your computer than it's worth. If you want to convert your money into an electric bill, go right ahead.

Does this seem like a good idea? Really?

blunderdog's picture

    Does this seem like a good idea?

Only if you're committed to the idea of "money."

If you don't care about money as a concept, and are A-OK with the CB's destroying it, Bitcoin is a "nothing."  If you care about money, it's a great idea.

XenoFrog's picture

You're correct in the fact that Bitcoin is nothing. Enjoy proving how US fiat is a ponzi scheme by getting involved in a much more obvious ponzi scheme.

blunderdog's picture

You don't understand what Bitcoin is at all.  It's not a Ponzi scheme.  It's a virtual commodity.

XenoFrog's picture

A virtual commodity controlled by a tiny number of bitcoin holders, and the exchanges are designed to make it easy for you to put money in and very hard to pull money out. Its followers cry, "Get in now before it's too late! You too can be rich quick!"

 

Now go look up Ponzi scheme in the dictionary. I'll wait.

blunderdog's picture

It's not "controlled" by anyone.  Once you have it, you can exchange it with any party who wants to exchange it.

Believe whatever you like.

Turin Turambar's picture

Yeah, I'll gladly exchange my material capital for virtual capital!  lol  The only 2 reasons people have stuck with fiat currency for as long as they have is the fact that at one time it was tied to something physical... usually gold or silver and legal tender laws.  Had this not been the case, then people would've thought the person who "invented" fiat currency was crazy.  Fiat currency with no history of commodity backing and no legal coercion to mandate its acceptance is akin to asking a person to part with the hard earned fruits of his labor in exchange for worthless little slips of paper or little metal discs that have no intrinsic value other than the "promise" that other people will accept them.  LOL

blunderdog's picture

A medium of exchange doesn't have to backed by a physical resource.  This should be obvious to everyone, given that none of the prevailing media of exchange are currently backed by any resources.  In case you haven't noticed, the dollar has continued to "work" despite that lack of a commodity-backing.

As a store of value, what defines the rate of inflation is the ease with which more of the commodity is produced.  Bitcoin is limited in production by mathematical definition.

Apparently that whole "Austrian economics" realization is far too advanced for some readers.

malikai's picture

As with anything worth paying attention to, BTC is controversial. Here demonstrated by our downvote fans.

Neethgie's picture

dude that is the most fucking stupid thing i have ever heard a virtual commodity, that is a paradox. It has no backing it does not even exist, how moronic can you be to buy into a ponzi scheme, A VIRTUAL COMMODITY, here do you want some virtual oil to start your virtual car with... get more people to buy and we will change the world... bitcoins keep losing value vs fiat.

 

There was a song named imaginary places.. where the song goes "kids if you wanna piss off your parents buy real estate in imaginary places" You are an adult who has done that... madness

blunderdog's picture

It's apparently beyond your understanding to think of a "virtual" anything.

What is the meaning of something like a "contract" in your world?  Do you believe a promise can "exist" in any meaningful way?

I don't really expect most folks to be able to understand what Bitcoin is.  It's not simple.

But then--neither is money.  Obviously most folks don't understand what that is, either.

Skateboarder's picture

Still regretting not throwing all my money into C when it was a dollar after the big crash. Twenty+ timesing your "investment" in a couple of years is like magic mang.

francis_sawyer's picture

citi did a reverse split when it got over $5 and was threatening to crash again...

It is & always was a piece of shit (that is propped up by mindless MOMOs in the interests of saving their jobs so that gullible 401k holders don't bail [which keeps the Saudi Princes inWestment from going tits up)...

As is everything ~ it's all bullshit...

Skateboarder's picture

I didn't know about the split - that renders the returns much lower than the big numbers make it out to look. Still quite impressive in terms of the short-term (lol at the phrase considering the HFT operations that have been screwing the place left and right) gains that one could have made by buy-low-sell-high at the right time.

My dad still owns WFC - I should probably get him to sell that shit and convert to gold before fiat goes down the toilet or gold reaches orbit.

KingTut's picture

.. and you have to ask yourself "what is the true risk in buying the stock of an insolvent bank"?

You are betting that the Fed will simply look the other way long enough for you make some bank (so to speak).

francis_sawyer's picture

Oddly ~ If one has everything else taken care of:

~~~

- food

- land

- water

- PM's

- guns & ammo, etc.

(NONE of which are a panacea ~ but may give you a small advantage)

all squared away... I'd have nothing against taking a flier on some small PAPER bets on this or that ('fun' money, so to speak)... As for me, I've become so sick of the system that there is no amount SMALL enough for francis_sawyer to call 'fun money'... I'd have more 'fun' with it betting on football games or giving it to strippers...

NidStyles's picture

You do not "give" money to strippers, you make small transactions for her to rub her titties all over your face.

NidStyles's picture

You do not "give" money to strippers, you make small transactions for her to rub her titties all over your face.

vast-dom's picture

ergo it's an honest fair transaction vs. QE for the banksters to rape their muppets. but i saw some JPM jerkoffs at the strip club getting their faces rubbed by titties and we may infer it was taxpayer dollars for tips so QE to the strippers, right?

vast-dom's picture

Dominique de Kevelioc de Bailleul: With the stock price of Morgan Stanley (NYSE:MS) inches from its Armageddon lows of Oct. 2008, whispers of the imminent overnight collapse of this U.S. broker-dealer begin to surface.  Client funds, again, are at risk.

“I’m hearing rumors that another major financial house is going to implode,” says TruNews host Rick Wiles.  In fact, the name I’ve been given is Morgan Stanley . . .

“It’s going to be put on the sacrificial alter by the financial elite.”

Beyond the evidence of a teetering stock price—Morgan Stanley’s troubles may never go away—leading to bankruptcy, if traders can glean anything from the financial activities of front-running insider George Soros, the man who warned in Jun. 2010 that the global financial crisis has entered “act II.”

According to Soros’ 13-F filing (ending Jun. 30) with the SEC, the billionaire financier reported that his fund sold nearly all shares of JP Morgan, Goldman Sachs and Citigroup—not paring back his holdings of financials, but completely dumping them.

And, as if to yell that the F.I.R.E economy is, indeed, on fire, the 82-year-old Soros also reports loading up on gold—adding a bit of poetry to Charlie Munger’s bizarre comment (1) in reference to investors who seek out gold in times of trouble.

Well, Soros’ act II has yet to crescendo to its tragic end, but “when a major global player with direct ties to the White House, Wall Street, and the banking system starts off-loading stocks and starts stacking gold, it suggests a very serious market move is set to happen,” says blogger Mac Slavo.

Adding to the speculation of a Morgan Stanley collapse, Bloomberg coincidentally pens an article on Aug. 23—the following day of the TruNews broadcast—in which the author Bradley Keoun recounts the dark days of Morgan Stanley at the height of act I of the financial crisis in 2008.

“At the peak of Morgan Stanley’s Fed borrowings, on Sept. 29, 2008, the firm reported that liquidity was ‘strong,’ without mentioning how dependent its cash stores had become on the government lifeline. . .” states Keoun.

“Neither Morgan Stanley nor its competitors in prime brokerage – Goldman Sachs Group Inc. (NYSE:GS), JPMorgan Chase & Co. (NYSE:JPM), Citigroup (NYSE:C) and Credit Suisse Group AG – disclose the size of their hedge-fund balances, leaving shareholders dependent on regulators who previously failed to rein in the risks. [Emphasis added]

But here’s where strong advice from Trends Research Institute founder Gerald Celente and former commodities broker Ann Barnhardt should be heeded.  Both consumer-friendly analysts implore investors and savers, alike, to withdraw from the financial system, warning that allocated brokerage accounts are not truly allocated. (2)

Bloomberg’s Keoun goes on to quote a former Financial Accounting Standard Board (F.A.S.B) member Adam Hurwich, who states, “It [Morgan Stanley's balance sheet] remains a black box,” referring to Morgan’s disclosure of whether allocated accounts at the firm have been re-hypothicated.

Regulators were asleep at the switch in the cases of MF Global and PFG Best, both filing bankruptcy post 2008, taking customer funds with them to the financial grave.  Why not Morgan Stanley?

“They don’t give you the information to be able to decipher whether they have changed anything,” adds Hurwich.

“Prime brokerage was presumed to be a pretty secure business, where the funding was not actually part of the liquidity of the bank,” Bloomberg quotes Frank Suozzo, president of FXS Capital LLC. “So if clients pulled their money out, the view was that money had not been lent out, so the cash would have been sitting there able to hand over. It turns out that that was not entirely correct.”

As the financial community found out in the case of MF Global, “prime brokers were able to reuse clients’ assets to raise cash for their own activities,” according to the financial crisis commission report, published Jan. 2011.

That’s a big red flag for investors to close their accounts with their brokerage firm—fast, especially accounts held at Morgan Stanley.

Why an establishment cheerleader such as Michael Bloomberg would allow an article which serves to remind investors of Morgan Stanley’s financial problems at this time may lend some credence to Rick Wile’s sources, who hear chatter about the impending doom of Morgan Stanley.

Like financial systems that could not be saved in the past, the banks must be then consolidated—that done, of course, after the bankruptcy, where the small investor gets wiped out and the ‘system’ acquires the remaining performing assets of the carcass.

The timing of the Bloomberg article is no coincidence.  Michael Bloomberg is only doing his part for the global banking cartel by tipping off that Morgan Stanley is ready for the “sacrificial alter.”  Get your money out.

(1) In early May, Munger told CNBC, “I think gold is a great thing to sow in to your garments if you’re a Jewish family in Vienna in 1939, but I think civilized people don’t buy gold.”  George Soros is a Jew, living in Hungary during the rise of the Third Reich.

(2) You can’t trust anybody and the entire system is collapsing.  What’s the takeaway from this?  It’s to make sure you have every penny in your pocket. —Gerald Celente, after losing 20 percent of his allocated brokerage account with MF Global.

“If you don’t understand what ‘get the hell out’ means, there’s not much I can do for you.” —Ann Barnhardt, after reviewing an appeals court ruling in the case of Sentinal Management Group, ruling that clients funds can be used to settle secured loans initiated through the banking industry.

web bot's picture

Nice reporting on this.

Soros is the canary in the coal mine. Somethings coming.

El Oregonian's picture

"Soros is the Vulture in the coal mine. Somethings coming."

Fixed.

web bot's picture

Ha ha - I agree! Nice one! +1

CPL's picture

Well done.  Now get it to the news room!

SmittyinLA's picture

LOL, read your brokerage agreements, I believe they ALL allow your custodian to play with your assets for free-(in not so few words). 

 

 

vast-dom's picture

i was in the toilet when that happened and i forget to power up my algo sys darkwave x-a-rr fuck!

ToNYC's picture

3/8 of a point on a 29 dollar stock is three 1/8 ticks. I remember shorting 4,000 GE and the infamous specialist would flash back the new offering a point higher after incessant statusing the order.

The only thing wrong with HFT is that it is a fraud since orders are entered without standing up two seconds for a human response. This is a human benefit transfer game or am I smoking crack with Bill Lee?

vast-dom's picture

Bill Lee shot dope. And yes HFT is destructive to markets, if your definition of investing is to move capital around to productive entities in order to facilitate growth and hence returns. 

max2205's picture

give me a ring when it moves 10 -20%...2% shit happens all the time now