At 1532ET today (Columbus Day - with half the market absent), someone - apparently having waited to see if the almost 'ubiquitous' 330pm Ramp would occur - decided it was time to dump three-quarters of a billion dollars notional of US equity market exposure in 1 second. The results of this forced liquidation (or utter disregard for fiduciary duty) were as follows...
A complete collapse of all liquidity in the S&P 500 e-mini futures contract - the world's most liquid equity exposure vehicle...
The liquidity evaporation began at 15:32:37 after 4,492 eMini contracts were dumped in 28 milliseconds $ES_F [6] $SPY [7]
— Eric Scott Hunsader (@nanexllc) October 13, 2014 [8]
[9]
An instantaneous 9 point plunge in the S&P 500...
[10]
And total chaos in the S&P 500 ETF (SPY) which saw offers below bids for what is hours to liquidity-providing HFTs (who appeared to step away for coffee)...
This chart shows just 1 second of SPY trading (corresponding to the volume spike above)
[11]
As Nasdaq quotes fell dramatically behind reality...
[12]
Given that NYSE margin debt at record highs and investor net worth at record lows...
[13]
The vicious cycle feedback from any extended push lower on liquidations is more than a little concerning (and may well explain the aggressive VIX buying today - and massive inversion of the VIX term structure)
[14]
Charts: Bloomberg and Nanex and @noalpha_allbeta
