Earlier today, when previewing today's quad witching day, we casually predicted that a "vol surge" lay ahead. What we really meant was a vol of vol surge, because just over an hour into today's trading, an HFT algo briefly lost it as it sent the critical VXX ETF (whose continued decline today has assured that the June E-Mini contract is now trading solidly above 2100 and pushing the S&P to fresh record highs).
The spike can be seen here:
[6]
... Which in turn led to a matched and just as ridiculous move in VIX:
[7]
Nanex' Eric Hunsader provided a zoomed in version of the flash smashy festivities, which one really should just sit back and enjoy:
The new game: $VXX [8] induced arbitrage, faster, and better than you. This went down in 3 seconds: pic.twitter.com/JpAdGCvzCf [9]
— Eric Scott Hunsader (@nanexllc) March 20, 2015 [10]
Bad #HFT [11] algo in $VIX [12] - 33% of all U.S. stock trading in these symbols. Chart shows 10 seconds pic.twitter.com/vu2r7sxeDA [13]
— Eric Scott Hunsader (@nanexllc) March 20, 2015 [14]
And the day is not even halfway done. Expect many more algo-induced market freak outs now that not only the biotech sector [15]...
[16]
... but the entire S&P500 is back in parabolic blow off top mode.
As for the market, which is now nothing more than a daily crime scene, events like these will continue as long as they provide short-term, paper benefits to more than half of the trading population. It is only after the crash that the wrath of the regulators, misplaced for the past 7 years, will magically reappear.
