4 ms·

If people are actually interested in what caused the flash crash, it was a sale of $4.1 billion of E-Mini contracts by a single fund. Report of SEC finding [PD

by chr15 16y ago

If people are actually interested in what caused the flash crash, it was a sale of $4.1 billion of E-Mini contracts by a single fund. Report of SEC finding [PDF]: http://www.sec.gov/news/studies/2010/marketevents-report.pdf http://www.sec.gov/news/studies/2010/marketevents-report.pdf

yummyfajitas 16y ago
To clarify, I meant "unknown at the time."
- dpapathanasiou 16y ago
  Well, you would have noticed it if your order book had open limit orders on PG: a sudden drop and recovery like that would have cleared them all.
gaius 16y ago
One thing that I think isn't getting enough attention is it wasn't even a Wall Street "master of the universe" like GS, just a relatively staid firm out on Main Street in the Midwest.
salemh 16y ago
From the report..and where much of the ludicrousness surround HFT exists: "Between 2:45:13 and 2:45:27, HFTs traded over 27,000 contracts, which accounted for about 49 percent of the total trading volume, while buying only about 200 additional contracts net... " While buying only 200 additional contracts...HFT algo's pinging the market with orders never placed :D
- yummyfajitas 16y ago
  You don't know what you are talking about. A) You can't ping the market with "orders never placed." You can place orders which may or may not be filled. In this case, they were filled. B) They are talking about trade volume, not order volume. Further, "200 additional contracts net". Thus means the HFTs immediately purchased 27,000 contracts and later resold 26,800 of them to someone else. Lastly, your laptop can probably process 27,000 trades in less than one second.
nomurrcy 16y ago
This really isn't what caused the flash crash. The SEC either doesn't have a complete understanding of what happened, or is omitting swaths of data from their report. Nanex did a much better job writing this all up, and weeks before the SEC published their report. http://www.nanex.net/FlashCrashFinal/FlashCrashSummary.html http://www.nanex.net/FlashCrashFinal/FlashCrashSummary.html
- nomurrcy 16y ago
  To further clarify: 75,000 e-mini contracts is not an astronomical amount. Orders of this size are not uncommon. To really understand what happened one must answer the question: what are the market conditions we have created such that a normal sized order can cause such a dislocation? A lot of this has to do with the practices of the HFT 'liquidity providers.' This is a complex topic, but the flash crash demonstrated what a lot of people have been saying for years: volume != liquidity, the HFT shops generate volume, not liquidity and engage in some practices (quote-stuffing, sub-pennying etc) which serve to systemically destabilize the markets. (and overload the market infrastructure)
  - vecter 16y ago
    Just a minor point, but I've never seen a 75,000 lot rip through ES in one order.
    - nomurrcy 16y ago
      No body just dumps all 75,000 in one transaction. The order is filled over a period of time. W/R didn't dump either, actually further analysis shows that they sold the majority of their contracts after the crash http://www.zerohedge.com/article/refuting-secs-lies-core-flash-crash-analysis http://www.zerohedge.com/article/refuting-secs-lies-core-fla... The blog here is zerohedge, but the data is from nanex.

by chr15 16y ago

yummyfajitas 16y ago

To clarify, I meant "unknown at the time."

dpapathanasiou 16y ago
Well, you would have noticed it if your order book had open limit orders on PG: a sudden drop and recovery like that would have cleared them all.

gaius 16y ago

One thing that I think isn't getting enough attention is it wasn't even a Wall Street "master of the universe" like GS, just a relatively staid firm out on Main Street in the Midwest.

salemh 16y ago

From the report..and where much of the ludicrousness surround HFT exists: "Between 2:45:13 and 2:45:27, HFTs traded over 27,000 contracts, which accounted for about 49 percent of the total trading volume, while buying only about 200 additional contracts net... " While buying only 200 additional contracts...HFT algo's pinging the market with orders never placed :D

yummyfajitas 16y ago
You don't know what you are talking about. A) You can't ping the market with "orders never placed." You can place orders which may or may not be filled. In this case, they were filled. B) They are talking about trade volume, not order volume. Further, "200 additional contracts net". Thus means the HFTs immediately purchased 27,000 contracts and later resold 26,800 of them to someone else. Lastly, your laptop can probably process 27,000 trades in less than one second.

nomurrcy 16y ago

This really isn't what caused the flash crash. The SEC either doesn't have a complete understanding of what happened, or is omitting swaths of data from their report. Nanex did a much better job writing this all up, and weeks before the SEC published their report. http://www.nanex.net/FlashCrashFinal/FlashCrashSummary.html http://www.nanex.net/FlashCrashFinal/FlashCrashSummary.html

nomurrcy 16y ago
To further clarify: 75,000 e-mini contracts is not an astronomical amount. Orders of this size are not uncommon. To really understand what happened one must answer the question: what are the market conditions we have created such that a normal sized order can cause such a dislocation? A lot of this has to do with the practices of the HFT 'liquidity providers.' This is a complex topic, but the flash crash demonstrated what a lot of people have been saying for years: volume != liquidity, the HFT shops generate volume, not liquidity and engage in some practices (quote-stuffing, sub-pennying etc) which serve to systemically destabilize the markets. (and overload the market infrastructure)
- vecter 16y ago
  Just a minor point, but I've never seen a 75,000 lot rip through ES in one order.
  - nomurrcy 16y ago
    No body just dumps all 75,000 in one transaction. The order is filled over a period of time. W/R didn't dump either, actually further analysis shows that they sold the majority of their contracts after the crash http://www.zerohedge.com/article/refuting-secs-lies-core-flash-crash-analysis http://www.zerohedge.com/article/refuting-secs-lies-core-fla... The blog here is zerohedge, but the data is from nanex.