Posts Tagged ‘flash crash’

Inside the Flash Crash Report

Pam Martens points out that in patching up May 6th’s market meltdown by breaking certains trades, “busts” only applied to trades occurring between 2:40 p.m. and 3 p.m. when the stock had moved 60% or more from its 2:40 p.m. price.  "The busts that were allowed covered 5.5 million shares and two-thirds of these trades had been executed at less than $1.00…  half of the share volume in these bizarre trades came from just two firms and half the time they were exclusively trading with each other."  The report – amazingly – never names these firms which had their own bad trades undone by that controversial decision that left average investors with large losses. - Ilene 

Inside the Flash Crash Report

By PAM MARTENS, originally published at CounterPunch

high frequency trading The breathlessly awaited government report that promised to shore up public confidence by explaining why the stock market briefly plunged 998 points on May 6, with hundreds of stocks momentarily losing 60 per cent or more of their value, was released last Friday, October 1.  Its neatly crafted finger-pointing to a small Kansas mutual fund firm which has been around since 1937, was immediately embraced as mystery solved by the stalwarts of the corporate press.  This was done with only slightly less zeal than bestowed on the story of Saddam Hussein’s weapons of mass destruction spun out of the George W. Bush administration.

The New York Times headlined with “Single Sale Worth $4.1 Billion Led to Flash Crash.” The Washington Post went with “How One Automated Trade Led to Stock Market Flash Crash.” The Wall Street Journal led with “How a Trading Algorithm Went Awry.”  Hundreds of similar headlines followed in similarly expensive media real estate.  But as with the rush to war on bogus intel, the corporate press may be further damaging its credibility with the American people by ignoring the dangerous market structure that emerges in a closer reading of this report.

The so-called Flash Crash report was the product of the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) and consists of 104 pages of data that is unintelligible to most Americans, including the media that are so confidently reporting on it.  It names no names, including the firm it is fingering as the key culprit in setting off the crash.  Earlier media reports say the firm is…
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Why Nobody Trades During Regular Hours Any More (And How Prop Funds Just Stop Trading When Volatility Spikes)

Why Nobody Trades During Regular Hours Any More (And How Prop Funds Just Stop Trading When Volatility Spikes)

HFTCourtesy of Tyler Durden at Zero Hedge 

For those who follow our periodic updates on intraday stock volume, today’s article by the Wall Street Journal which focuses on the dramatic decline in activity during regular working hours will come as no surprise. In a piece looking at prop trading shop Briargate (oh so witty anagram of arbitrage), founded by several former NYSE specialists, we learn that at least one firm (and likely many more) now no longer does any trading during the hours of 11 to 2. As this creates a feedback loop of inactivity, pretty soon the core of daily stock market activity will merely be the half an hour of action at the open, and the dark pool-ETF-open exchange rebalance at the very close, with everything inbetween deemed obsolete.

Of course, what this will do, is create even more volatility in trading, force an even greater decline in stock trading volumes (and pain for Wall Street firms), and a further divergence between stocks and fundamentals, as momentum trading gains an even more prominent role in determine "price discovery."

From the WSJ:

On the day the "flash crash" bludgeoned the stock market and chaos swept over the floor of the New York Stock Exchange, the founders of Briargate Trading were at the movies.

Rick Oscher and Steven Rubinstein weren’t playing hooky. Briargate, a proprietary-trading firm that the two former NYSE floor "specialist" traders started in 2008, is mostly active at the stock market’s open and close.

In between, when market activity typically drops, the Wall Street veterans play tennis in Central Park, take leisurely lunches, visit their children’s schools and work out at the gym. Dress shoes have been replaced with flip-flops, slacks with cargo shorts. Once during market hours, they walked about five miles and crossed the Brooklyn Bridge to try Grimaldi’s pizza.

"We actually planned on working a full day," says Mr. Oscher, wearing a white polo shirt and blue-plaid shorts. "But from 11 to 2, the markets are pretty quiet—what’s the point? As a specialist, you have to stand in your spot all day and we did that for 20 years."

Briargate—an anagram of "arbitrage"—isn’t the only firm taking an extended recess during the 6½-hour U.S. trading day. Trading has become increasingly concentrated in the


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Happy High Frequency Trading Day!

Happy High Frequency Trading Day!

high frequency trading Courtesy of Joshua M Brown, The Reformed Broker 

Michael Peltz has a mammoth 13-pager on High Frequency Trading in the latest issue ofInstitutional Investor magazine.  The article is chock full of important information, including the 25 stocks most played with by high frequency traders (Sprint, Las Vegas Sands, Bank of America…). 

It also contains some killer quotes.  Here are a couple before I send you over to read the whole thing:

An exchange between the writer and financially-savvy Senator Ted Kaufman:

“We have a 300-pound gorilla in the room, and we’re saying that we’re going to keep it in a cage somewhere,” he told me. “This thing will be 600 pounds.”

“But isn’t part of the problem that there are 300 gorillas?” I asked, referring to the fact that an estimated 200 to 400 firms do high frequency trading.

“Good point,” he replied. “We have all these gorillas, and guess what? We put them in zoos where the people running the zoos don’t have enough information and authority to take care of them.”

Seth Merrin of LiquidNet, a block trading marketplace:

“The institutions are the equivalent of the British army, walking down the battlefield wearing bright red.  The high frequency traders are the Americans hiding in the woods in camouflage, picking them off. If the British army hadn’t changed its tactics, they would have lost every subsequent war.”

There are some HFT defenders in the piece, spouting the usual rhetoric about how wonderful their liquidity is (a claim that I believe was invalidated during the Flash Crash as the robots drooped their heads like marionettes with cut strings just when their liquidity was needed most), but these defenders are industry insiders for the most part.

Anyway, get acquainted with the players involved and the terminology – this debate is just beginning.

Source:

Inside The Machine (II) 

Picture credit: Jr. Deputy Accountant  


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When Do We Start Arresting The Central Bankers?

When Do We Start Arresting The Central Bankers?

Courtesy of Karl Denninger at The Market Ticker 

You want to know where the spikes in the Euro came from today?

Try here:

That’s "official intervention" by the Swiss National Bank and if they don’t cut this crap out they’re going to cause an equity and credit market collapse.

These jackasses now have double the Euros they held just a short while ago from these "operations", and as you can see, they’re pissing into a hurricane on even a daily basis, say much less on anything more consequential:

 

Congress does not have the right to get involved in the affairs of a foreign sovereign. 

But Congress has every right to demand that Bernanke close his goddamn swap lines right now until this shit stops, lest The Fed be the one who is on the hook when the entire ECB structure comes apart and WE THE TAXPAYERS are on the hook.

This sort of tampering, performed by a private party, is illegal.  Of course it’s routine and "expected" in the FX space for sovereigns to interfere, but much of the instability that we have seen of late has been caused by this sort of "intervention."  Specifically, today it was responsible for a sixteen point, or 1.5%, jackrabbit move in both directions in the stock market in the space of less than two hours.

There is absolutely no excuse for The United States to support this sort of garbage with our taxpayer backstops.  These instabilities in the foreign exchange markets make it impossible for real companies to hedge costs and profits in foreign nations and do severe and irrevocable damage to these firm’s operations.

It is also reflecting into the US Commercial Paper markets and driving spreads wider there as well. This is the very same market that locked up in 2008 and triggered the equity market collapse.

The SNB’s "interest" in doing this is clear: Half of European banks are stuffed full of debt written in Swiss Francs – in nations where the currency is the Euro!  These idiots (both the borrowers and the banks that offered these "products") have now seen the principal balance of these loans represented in Euros rise by 11% in the last year.

This sort of idiocy, incidentally, is one of the reasons two years ago that I said there was no chance we could possibly "inflate our way out" or…
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Flash Crash Means Dash For Cash – Big Fund Outflows Reported

Flash Crash Means Dash For Cash – Big Fund Outflows Reported

Opening Night Of Dr. Seuss' How The Grinch Stole Christmas! The Musical

Courtesy of Joshua M. Brown, The Reformed Broker 

Sorry about my Dr. Seuss-esque post title, I’ve always wanted to do that.

Don’t fall out of your chair on this one, but apparently, regular folks aren’t such big fans of intraday 1000 point swings when it comes to their savings and investments.

Zero Hedge has the outflows data for the week after May 6th…

ICI has reported the most recent fund flow data, and it’s a doozy. In the week following the flash crash, domestic equity funds saw a whopping $8.6 billion in outflows. As a result, the YTD outflow is over $9 billion.

Keep it up, fellas.  With any luck, we can push anyone with a beating heart out of these markets and go software only.

Disgraceful.

Source:

Whopping $9 Billion in Equity Fund Outflows Following Flash Crash (Zero Hedge) 


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The Debt Baguette

The Debt Baguette

Courtesy of Joshua M Brown at Reformed Broker 

Here’s the latest from the trench warfare happening ‘Over There’, by which I mean the Euro Zone…

*Rumors abound today about a forthcoming ratings downgrade of France.  Just rumors, but enough to spook every risk asset in sight.

*The Euro has sunk to 1.24 to the US dollar, meanwhile the dollar sinks against gold.  The only thing not sinking is the oil containment equipment in the Gulf of Mexico.

*People are talking about Euro/Dollar parity.  This is a frightening prospect for US exporters and the stock market is pricing that in as we speak (Dow down almost 200 as of lunchtime).

*Gold is entering that spastic phase where everything even tangentially related to it goes parabolic.  Look at the action in the miners, in the precious metals ETFs and ETNs.  You can smell it.

*I’m no expert on the latest Euro austerity plan, but I know people.  This thing ain’t happening, at least not in its current form.  Drug addicts don’t quit addicitions cold turkey, they need methadone and a church basement in which to smoke cigarettes, drink coffee and tell their tales of woe. 

*The Shanghai stock market also isn’t doing anybody any favors, having just this week entered bear market territory (off 20% from the recent high).

*There’s also some talk of Flash Crash II.  Just the fact that people are talking this way tells you that the buyers are in no rush to step in and be heroes at this point.

Be careful out there.  And yes, The Debt Baguette is mine but you can use it. 


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Jon Stewart on the Flash Crash

Jon Stewart on the Flash Crash

Courtesy of Josh M. Brown, The Reformed Broker 

The market plunged because of a "Perfect Storm"…one that happens about every two weeks.

The Daily Show With Jon Stewart Mon – Thurs 11p / 10c
A Nightmare on Wall Street
www.thedailyshow.com
Daily Show Full Episodes Political Humor Tea Party

 


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Zero Hedge

Accused "FX Cartel" Members Joined Forces After Trying To "End" Each Other

Courtesy of ZeroHedge. View original post here.

As federal prosecutors in Manhattan press ahead with the trial of three London-based currency traders - members of the infamous "FX Cartel" who allegedly colluded to move exchange rates in their favor during the brief moments before the daily fix - more amusing details from the cartel's group chat where most of the alleged collusion took place have started to emerge.

In one anecdote that helps explain the genesis of the cartel conspiracy, two of the three traders, former JPMorgan Chase & Co. trader Richard Usher and ex-Citigroup Inc. trader Rohan Ramchandani, share how they u...



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Phil's Favorites

Taxes and caps on carbon work differently but calibrating them poses the same challenge

 

Taxes and caps on carbon work differently but calibrating them poses the same challenge

There are different kinds of policies that can curb greenhouse gases. Climber 1959/Shutterstock.com

Courtesy of Amitrajeet A. Batabyal, Rochester Institute of Technology

Virtually everything most people on earth do these days involves, either directly or indirectly, the combustion of oil, gas and coal. Burning these fossil fuels is generating carbon emissions, which accumulate in the atmosphere, contributing to ...



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Kimble Charting Solutions

Stock Market Crash Deja Vu? Keep An Eye On This Pattern!

Courtesy of Chris Kimble.

Just over 3 weeks ago, I shared a chart looking at the divergence that has been brewing under the surface of the S&P 500 (NYSEARCA:SPY). Since that post, the S&P 500 finds itself in a deep pullback, with other key stock market indices hitting correction territory at their lows.

Today we provide another look at the divergence and highlight why it’s time for investors to pay closer attention. In the chart below, we compare today’s setup to 2000 and 2007 and the market crashes that followed.  Note, though, that we have NOT broken trend support yet.

Similar to today, in 2000 and 2007 the S&P 500 made a...



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Chart School

History Rhymes with the Dow

Courtesy of Read the Ticker.

The next 10 years, or even the next 2 years will not be like any of the years in the past 10. Risk is moving closer and closer to the surface.

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Market risks coming to the surface:

1) Higher interest rates.

2) US Congress control.

3) China vs USA in trade.

4) World wide Leverage.

5) World wide liquidity issues.

6) US Pensions.

7) Corporate bond market....



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Digital Currencies

Grocers: Get ready to join the blockchain party

 

Grocers: Get ready to join the blockchain party

Five people died and more than 200 got sick during a 2018 E. coli outbreak, the largest in more than a decade. The bacteria was traced to contaminated romaine lettuce. (Shutterstock)

Courtesy of Sylvain Charlebois, Dalhousie University

In the wake of this year’s large E. coli outbreak, Walmart notified its leafy green suppliers that they must be using blockchain technology to trace their products before the end of 2019.

Walmart, one of the world’s largest retailers, has be...



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Insider Scoop

10 Stocks To Watch For October 18, 2018

Courtesy of Benzinga.

Some of the stocks that may grab investor focus today are:

  • Wall Street expects Philip Morris International Inc. (NYSE: PM) to report quarterly earnings at $1.27 per share on revenue of $7.15 billion before the opening bell. Philip Morris shares fell 0.07 percent to $84.50 in after-hours trading.
  • Analysts expect PayPal Holdings, Inc. (NASDAQ: ...


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ValueWalk

Vilas Fund Up 55% In Q3; 3Q18 Letter: A Bull Market In Bearish Forecasts

By Jacob Wolinsky. Originally published at ValueWalk.

The Vilas Fund, LP letter for the third quarter ended September 30, 2018; titled, “A Bull Market in Bearish Forecasts.”

Ever since the financial crisis, there has been a huge fascination with predictions of the next “big crash” right around the next corner. Whether it is Greece, Italy, Chinese debt, the “overvalued” stock market, the Shiller Ratio, Puerto Rico, underfunded pensions in Illinois and New Jersey, the Fed (both for QE a few years ago and now for removing QE), rising interest rates, Federal budget deficits, peaking profit margins, etc...



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Members' Corner

Why obvious lies still make good propaganda

 

This is very good; it's about "firehosing", a type of propaganda, and how it works.

Why obvious lies still make good propaganda

A 2016 report described Russian propaganda as:
• high in volume
• rapid, continuous and repetitive
• having no commitment to objective reality
• lacking consistency

...

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Biotech

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

 

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

Breast cancer type 1 (BRCA1) is a human tumor suppressor gene, found in all humans. Its protein, also called by the synonym BRCA1, is responsible for repairing DNA. ibreakstock/Shutterstock.com

By Jay Shendure, University of Washington; Greg Findlay, ...



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Mapping The Market

Mistakes were Made. (And, Yes, by Me.)

Via Jean-Luc:

Famed investor reflecting on his mistakes:

Mistakes were Made. (And, Yes, by Me.)

One that stands out for me:

Instead of focusing on how value factors in general did in identifying attractive stocks, I rushed to proclaim price-to-sales the winner. That was, until it wasn’t. I guess there’s a reason for the proclamation “The king is dead, long live the king” when a monarchy changes hands. As we continued to update the book, price-to-sales was no longer the “best” single value factor, replaced by others, depending upon the time frames examined. I had also become a lot more sophisticated in my analysis—thanks to criticism of my earlier work—and realized that everything, including factors, moves in and out of favor, depending upon the market environment. I also realized...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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