Cable Just Flash-Crashed 800 Pips - Most Since Brexit

Having leaked lower all week, GBPUSD suddenly flash-crashed almost 8 big figures as Japanese markets woke up. The instantaneous collapse from 1.2620 to 1.1840 was triggered by no news...

Spot collapsed to 1.1841...

 

Futures show the carnage began at 19:07:05ET:

 

No immediate catalyst was obvious aside from the Japanese opening time, while the USDJPY is going ever so slightly berserk at the time the GBP fireworks started.

 

The Cable crash rippled into Yuan trading.

 

For context.

Cable's all-time low was 1.0520 in March 1985.

While nobody knows what caused the crash, Bloomberg has provided some potential explanations.

The GBP/USD slide could be due to erroneous order and/or flows related to stop-loss orders or options given USD/JPY or EUR/USD aren’t moving much, says Toshihiko Sakai, Tokyo- based chief manager of FX and financial products trading at Mitsubishi UFJ Trust & Banking.

Looks like there was a large GBP sell order amid thin liquidity, says Kyosuke Suzuki, head of FX and money-market sales at Societe Generale.

Others believe that the massive move has been partly attributed to algos failing after traders targeted downside option barriers, say three Asia-based FX dealers. Traders typically place their nearest orders within 100 ticks of spot, which was at roughly 1.26 before today’s plunge.

The drop accelerated as liquidity disappeared, and dealers failed to load bids into their trading platforms, say traders, or in other words, your plain, garden variety algo-facilitated flash crash when the bid side suddenly disappears as one or more "liquidity providers" turn themselves off.

Cited by Bloomberg, one trader says his FX pricing aggregator of eight contributors blacked out for 30 seconds amid an absence of bids.

Furthermore, multiple large option barriers in the over-the-counter market were triggered, including 1.25 and 1.20, say traders.  Traders say they missed buy orders much lower down and had to scramble to cover inherited short positions, thus contributing to the roughly 500-point rally.