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 [9]. 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:
[10]
Then we get the normal follow-up:
- NASDAQ ISSUES E-MAILED STATEMENT ON 'SPY' TRADES
- POTENTIALLY ERRONEOUS `SPY' TRANSACTIONS BEING PROBED
- TRANSACTIONS WERE EXECUTED BETWEEN 15:59:00-16:00:00 ET
But... then... an odd thing happened...
- ALL TRADES IN 'SPY' WILL STAND
[11]
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 [12]"?
[13]
Caught Fed-handed? We'll never know.
