CEO of the NYSE explains what caused the drop in the market today 6 May 2010
http://money.cnn.com/video/markets/2010/05/06/mkts_nyse_ceo.cnnmoney/
.Here they FULLY ADMIT that they rigg the markets by Computer Intervention.http://money.cnn.com/video/markets/2010/05/06/mkts_nyse_ceo.cnnmoney/
WE SLOW THE MARKET - Yeah for you NOT FOR THEM!
But it's not bad ahahah!
But Goldman Sachs can go in front of you - FRONTRUNNING! Ohhh! That's not bad either steelin miilions a day for crying out loud!
.
TRANSCRIPT: CEO of the NYSE explains what caused the drop in the market on 6 May 2010 on CNN
Q: Duncan first I think the big question is what happened today with the sell off
Duncan: Well that's a pretty broad question but I think you saw is asturbated volatility largely due to the Market structure
I think there was a lot of selling around the Greece issue But I think the market went down a lot more than it otherwise would have If it were not for some of the market structure and efficiencies.
Q: Talk about the market structure and efficiencies because as we spoke before you talked about SLOWED TRADES on this exchange and NOT OTHERS. It's complex but it's important to this.
Duncan: It's gonna sound very technical but we have a different market model than everybody else. We trade as fast as they do WHEN WE THINK IT'S APPROPRIATE.
But when there is very high volatility like there is today we have it in our market model to basically slow the market down and take 40 or 60 seconds sometimes to find the right price for a stock.
And today was, because of the volatility today THAT TRIGGER KICKED IN IN A LOT OF STOCKS so what happened ......
Q: Is that automatic or is that a decision made by the people here?
Duncan: It depends on the movement, it's stock by stock, you know how many, it's basically tied to the stock-price in every stock and if a stock moves down X amount at one time we say "wait Oh Minute lets find the right price", so we SLOW DOWN ....
Q: What happened we're talking about Procter & Gamble 3AM a centre major stock here that we're SLOWED?
Duncan: Right .....so those are three examples and ITS PART OF OUR MODEL.. So, so please don't say SLOWED like that is a bad thing.
We actually think it's good for the issuers and investors. We think people are nervous. We decimate to the rest of the markets that the next trade in these stocks is not gonna be a milli second from now, it's gonna be 40 or 60 seconds from now.
The rest of the markets are free to trade around us, through us, with us anywhere they want and that's what they did today.
It turns out that we opened Procter and gamble a minute later at roughly the same price we traded it at the last time, the other markets have sold us down in that case 20% or 30% at the interim.
Q: The NASDAQ issue a statement saying that there was a faulty trade, there was an error made. Was does that mean for the average person?
Duncan: I think what happens is, I donnow that it's a faulty trade the way everyone would think about it. I think that everyone looking for the smoking gun saying what, what trader made a mistake, who had a fat finger and sold something it didn't mean to sell. My view is that is not what happened. What happens in these periods is, in a day like today, it may just take a few offers of people selling the put in a market sell order, the think they are gonna get filled near the price and because of THE OTHER ELECTRONIC MARKETS are thinly trade the next price maybe down 5, 10, 15 dollars and that 's how THINGS trade. So I think you'll see NASDAQ and other electronic markets, including Archipelago take trades off the tape later as erroneous.
Q: What was it like on the way up cause the market was off nearly a 1000 points. It closed down just 347, I say just because that was quiet a phenomenal recovery.
Duncan: Right, but if you think about it the market was down about 400 before WE WENT INTO THE SLOW MODE on Triple-M and P&G and Excenter and others and I think a lot of that move from 500 and than down a 1000 was people seeing these stocks trading strange prices getting a little nervous and you saw it snap back right away. There was not a lot of volume on the way down or frankly on the way back up and it doesn't surprise me that the market ended up closing down about 400 that's kinda where we were before we had the KNOCK OUT EFFECTS OF US saying: "Hee! we gonna slow down for a minute". We recommend to the other markets don't trade trough us during that time and they did.
Q: I was just gonna ask you that should that teach us that maybe all of the markets place should be connected in order to all slow their trades at the same time because you said we halted our trades for a while and others traded trough us?
Duncan: Right, and remember a while, I don't like to use the word halt cause halt means something else technically in the market OK. Halt means you may not open for an hour. THIS IS PART OF OUR MARKET MODEL. WE INTERVENE HUMAN JUDGEMENT. we do price discovery. It takes 40 to 60 seconds, it doesn't take forever and we think the market should wait. They obviously think for competitive reasons they shouldn't have to wait and they are gonna trade at whatever prices they wonna trade at any interim
Q: Big question is how much money was lost as result of this trade? The market closed down near the lows of were it was before the sell off. But what kind of damage could this do to investors?
Duncan: Well, it's hard to know because we don't know how many trades, a lot of times what happens is these trades will be cancelled. People will say ; "Oh we didn't realize what was going on". The fact is that these electronic markets realize full well what is going on. They have policies to deal with these kind of things. The last time this happened frequently was during the crises where there were thousands of trades cancelled on a daily basis at the electronic venues because it's a different market model, so.
Q: Who or what if anything should or can be held liable. you said it's a different market model that's what the traders told me: "This is the new market place"
Duncan: Right, and in our view we think we've got the best market model no surprise we gonna say that right others think they have a better market model I think in periods in volatility like this our model shows it's value. A computer just looks for the next price that it can fill it's order at. So if you put a market sell order in and I am the only bidder on that electronic system your orders getting filled whatever my bid is. It could be 10, 20 40 dollars below the market price and I think we just have to say in periods of extreme volatility people should trade their orders more carefully. Now the SCC could come out and say; "He guys wait a minute" if it's a trading halt we get that you're not gonna wait. When it's one of these situations were it's a half a minute or a minute why don't we all wait and let cooler heads prevail.
Q: Yeah, the volatility will maybe over for the day, Asians markets will open shortly, European markets, this market place will open on Friday morning and heading into the weekend the big question is will traders want to hold their positions, with the volatility, with the crises in Greece and Europe. Question is Duncan what are you do going into tomorrow.
Duncan: I am not a trader any more I am just a guy running a business but I think the view is coming into a Friday after the week of volatility we've had, it's hard to believe people will come in with bids tomorrow but the market is sold off quiet a bit here and I think people are just trying to digest; " How big a issue is Greece? What is the contagion effect? You had a couple of people say today there's gonna be knock on effects were the credit market seems to be ceasing up. That's gonna make people really really nervous especially on a Friday in front of a weekend.
Q: It's a big question again as I've been saying all of doom what happens going into tomorrow.
Duncan: Yeah, yeah hard to predict I, It's, we'll find out tomorrow. I mean that makes the market right, so OK.
END
CNN: CEO of the NYSE explains what caused the drop in the market on 6 May 2010
http://money.cnn.com/video/markets/2010/05/06/mkts_nyse_ceo.cnnmoney/
.Q: Duncan first I think the big question is what happened today with the sell off
Duncan: Well that's a pretty broad question but I think you saw is asturbated volatility largely due to the Market structure
I think there was a lot of selling around the Greece issue But I think the market went down a lot more than it otherwise would have If it were not for some of the market structure and efficiencies.
Q: Talk about the market structure and efficiencies because as we spoke before you talked about SLOWED TRADES on this exchange and NOT OTHERS. It's complex but it's important to this.
Duncan: It's gonna sound very technical but we have a different market model than everybody else. We trade as fast as they do WHEN WE THINK IT'S APPROPRIATE.
But when there is very high volatility like there is today we have it in our market model to basically slow the market down and take 40 or 60 seconds sometimes to find the right price for a stock.
And today was, because of the volatility today THAT TRIGGER KICKED IN IN A LOT OF STOCKS so what happened ......
Q: Is that automatic or is that a decision made by the people here?
Duncan: It depends on the movement, it's stock by stock, you know how many, it's basically tied to the stock-price in every stock and if a stock moves down X amount at one time we say "wait Oh Minute lets find the right price", so we SLOW DOWN ....
Q: What happened we're talking about Procter & Gamble 3AM a centre major stock here that we're SLOWED?
Duncan: Right .....so those are three examples and ITS PART OF OUR MODEL.. So, so please don't say SLOWED like that is a bad thing.
We actually think it's good for the issuers and investors. We think people are nervous. We decimate to the rest of the markets that the next trade in these stocks is not gonna be a milli second from now, it's gonna be 40 or 60 seconds from now.
The rest of the markets are free to trade around us, through us, with us anywhere they want and that's what they did today.
It turns out that we opened Procter and gamble a minute later at roughly the same price we traded it at the last time, the other markets have sold us down in that case 20% or 30% at the interim.
Q: The NASDAQ issue a statement saying that there was a faulty trade, there was an error made. Was does that mean for the average person?
Duncan: I think what happens is, I donnow that it's a faulty trade the way everyone would think about it. I think that everyone looking for the smoking gun saying what, what trader made a mistake, who had a fat finger and sold something it didn't mean to sell. My view is that is not what happened. What happens in these periods is, in a day like today, it may just take a few offers of people selling the put in a market sell order, the think they are gonna get filled near the price and because of THE OTHER ELECTRONIC MARKETS are thinly trade the next price maybe down 5, 10, 15 dollars and that 's how THINGS trade. So I think you'll see NASDAQ and other electronic markets, including Archipelago take trades off the tape later as erroneous.
Q: What was it like on the way up cause the market was off nearly a 1000 points. It closed down just 347, I say just because that was quiet a phenomenal recovery.
Duncan: Right, but if you think about it the market was down about 400 before WE WENT INTO THE SLOW MODE on Triple-M and P&G and Excenter and others and I think a lot of that move from 500 and than down a 1000 was people seeing these stocks trading strange prices getting a little nervous and you saw it snap back right away. There was not a lot of volume on the way down or frankly on the way back up and it doesn't surprise me that the market ended up closing down about 400 that's kinda where we were before we had the KNOCK OUT EFFECTS OF US saying: "Hee! we gonna slow down for a minute". We recommend to the other markets don't trade trough us during that time and they did.
Q: I was just gonna ask you that should that teach us that maybe all of the markets place should be connected in order to all slow their trades at the same time because you said we halted our trades for a while and others traded trough us?
Duncan: Right, and remember a while, I don't like to use the word halt cause halt means something else technically in the market OK. Halt means you may not open for an hour. THIS IS PART OF OUR MARKET MODEL. WE INTERVENE HUMAN JUDGEMENT. we do price discovery. It takes 40 to 60 seconds, it doesn't take forever and we think the market should wait. They obviously think for competitive reasons they shouldn't have to wait and they are gonna trade at whatever prices they wonna trade at any interim
Q: Big question is how much money was lost as result of this trade? The market closed down near the lows of were it was before the sell off. But what kind of damage could this do to investors?
Duncan: Well, it's hard to know because we don't know how many trades, a lot of times what happens is these trades will be cancelled. People will say ; "Oh we didn't realize what was going on". The fact is that these electronic markets realize full well what is going on. They have policies to deal with these kind of things. The last time this happened frequently was during the crises where there were thousands of trades cancelled on a daily basis at the electronic venues because it's a different market model, so.
Q: Who or what if anything should or can be held liable. you said it's a different market model that's what the traders told me: "This is the new market place"
Duncan: Right, and in our view we think we've got the best market model no surprise we gonna say that right others think they have a better market model I think in periods in volatility like this our model shows it's value. A computer just looks for the next price that it can fill it's order at. So if you put a market sell order in and I am the only bidder on that electronic system your orders getting filled whatever my bid is. It could be 10, 20 40 dollars below the market price and I think we just have to say in periods of extreme volatility people should trade their orders more carefully. Now the SCC could come out and say; "He guys wait a minute" if it's a trading halt we get that you're not gonna wait. When it's one of these situations were it's a half a minute or a minute why don't we all wait and let cooler heads prevail.
Q: Yeah, the volatility will maybe over for the day, Asians markets will open shortly, European markets, this market place will open on Friday morning and heading into the weekend the big question is will traders want to hold their positions, with the volatility, with the crises in Greece and Europe. Question is Duncan what are you do going into tomorrow.
Duncan: I am not a trader any more I am just a guy running a business but I think the view is coming into a Friday after the week of volatility we've had, it's hard to believe people will come in with bids tomorrow but the market is sold off quiet a bit here and I think people are just trying to digest; " How big a issue is Greece? What is the contagion effect? You had a couple of people say today there's gonna be knock on effects were the credit market seems to be ceasing up. That's gonna make people really really nervous especially on a Friday in front of a weekend.
Q: It's a big question again as I've been saying all of doom what happens going into tomorrow.
Duncan: Yeah, yeah hard to predict I, It's, we'll find out tomorrow. I mean that makes the market right, so OK.
END
CNN: CEO of the NYSE explains what caused the drop in the market on 6 May 2010
http://money.cnn.com/video/markets/2010/05/06/mkts_nyse_ceo.cnnmoney/
CEO of the NYSE explains what caused the drop in the market on 6 May 2010
http://www.youtube.com/watch?v=Up5XtW7kM_c
.http://www.youtube.com/watch?v=Up5XtW7kM_c
CNBC's Bartiromo: 'That is Ridiculous. This Really Sounds Like Market Manipulation to Me'
6 May 2010, by Jeff Poor (Business & Media Institute)
http://www.businessandmedia.org/articles/2010/20100506174136.aspx
Network reports 8 stocks went to one penny or zero, which contributed to freefall and drawing ire of 'Closing Bell' anchor.
Watch Vid: http://www.youtube.com/watch?v=2VjSJNofkXg
While everyone is scratching their heads and trying to figure out how the Dow Jones Industrial Average (DJIA) lost nearly 1,000 points before rallying back to lose only 347 points – it appears not to be limited to just one stock.
On CNBC’s May 6 “Closing Bell,” correspondent Matt Nesto explained that investigators for both the stock exchanges and for Citigroup, the firm that some are pointing fingers at for a so-called trader error, have narrowed it down to a futures index called the E-mini S&P 500.
“A person familiar with the Citi investigation said one focus of the trading probes were the futures contracts tied to the S&P 500 stock index known as the E-mini S&P 500 futures and in particular that two-minute window in which 16 billion of the futures were sold,” Nesto said. “Again, those sources are telling us that Citigroup’s total E-mini volume for the entire day was only 9 billion, suggesting that the origin of the trades was elsewhere.”
Nesto named eight stocks that were hit with the supposed computer error/bad trade, if that’s indeed what happened, that went all the way down to zero or one cent, including Exelon (NYSE:EXC), Accenture (NYSE:ACN), CenterPoint Energy (NYSE:CNP), Eagle Material (NYSE:EXP), Genpact Ltd (NYSE:G), ITC Holdings (NYSE:ITC), Brown & Brown (NYSE:BRO), Casey’s General (NASDAQ:CASY) and Boston Beer (NYSE:SAM)
“Now according to someone else close to Citigroup’s own probe of the situation, the E-Minis trade on the CME,” Nesto continued. “Now Maria, I want to add something else just in terms of these erroneous trades that Duncan Niederauer, the NYSE CEO was just talking about. I mean, we’ve talked a lot about Accenture, ACN. This is a Dublin-based company. It's not in any of the indexes. If you look in the S&P 500, for example, I show at least two stocks that traded to zero or one cent – Exelon and CenterPoint. If you look in the Russell 1,000, I show Eagle Materials, Genpact, ITC and Brown & Brown, also trading to zero or a penny, and also Casey's General Stores, as well as Boston Beer trading today, intraday, to zero or a penny. So those have at least eight names that they're going to have to track down on top of the Accenture trade, where we have the stock price intraday showing us at least, we'll assume, a bogus trade of zero.”
Nesto calling these trades “bogus” drew backlash from the host and CNBC veteran Maria Bartiromo, who said those trades sounded like “market manipulation” to her.
“ That is ridiculous,” Bartiromo replied. “I mean this really sounds like market manipulation to me. This is outrageous.”
According to Nesto, these are frequent occurrences, at least at the NASDAQ exchange and if you make a trade a lose money, there’s no recourse.
“It happens a lot, Maria. It really does. I mean, we could probably ask the NASDAQ, they may not want to say how often it happens, but it happens frequently. And they go back and they correct. And the thing that stinks is if you in good faith put in a trade and made money and then lost it, you lose it. And there's no recourse and there's no way to appeal.”
CNBC's Bartiromo: 'That is Ridiculous. This Really Sounds Like Market Manipulation to Me' 6 May 2010 (Business & Media Institute) http://tinyurl.com/2ambw3x
.6 May 2010, by Jeff Poor (Business & Media Institute)
http://www.businessandmedia.org/articles/2010/20100506174136.aspx
Network reports 8 stocks went to one penny or zero, which contributed to freefall and drawing ire of 'Closing Bell' anchor.
Watch Vid: http://www.youtube.com/watch?v=2VjSJNofkXg
While everyone is scratching their heads and trying to figure out how the Dow Jones Industrial Average (DJIA) lost nearly 1,000 points before rallying back to lose only 347 points – it appears not to be limited to just one stock.
On CNBC’s May 6 “Closing Bell,” correspondent Matt Nesto explained that investigators for both the stock exchanges and for Citigroup, the firm that some are pointing fingers at for a so-called trader error, have narrowed it down to a futures index called the E-mini S&P 500.
“A person familiar with the Citi investigation said one focus of the trading probes were the futures contracts tied to the S&P 500 stock index known as the E-mini S&P 500 futures and in particular that two-minute window in which 16 billion of the futures were sold,” Nesto said. “Again, those sources are telling us that Citigroup’s total E-mini volume for the entire day was only 9 billion, suggesting that the origin of the trades was elsewhere.”
Nesto named eight stocks that were hit with the supposed computer error/bad trade, if that’s indeed what happened, that went all the way down to zero or one cent, including Exelon (NYSE:EXC), Accenture (NYSE:ACN), CenterPoint Energy (NYSE:CNP), Eagle Material (NYSE:EXP), Genpact Ltd (NYSE:G), ITC Holdings (NYSE:ITC), Brown & Brown (NYSE:BRO), Casey’s General (NASDAQ:CASY) and Boston Beer (NYSE:SAM)
“Now according to someone else close to Citigroup’s own probe of the situation, the E-Minis trade on the CME,” Nesto continued. “Now Maria, I want to add something else just in terms of these erroneous trades that Duncan Niederauer, the NYSE CEO was just talking about. I mean, we’ve talked a lot about Accenture, ACN. This is a Dublin-based company. It's not in any of the indexes. If you look in the S&P 500, for example, I show at least two stocks that traded to zero or one cent – Exelon and CenterPoint. If you look in the Russell 1,000, I show Eagle Materials, Genpact, ITC and Brown & Brown, also trading to zero or a penny, and also Casey's General Stores, as well as Boston Beer trading today, intraday, to zero or a penny. So those have at least eight names that they're going to have to track down on top of the Accenture trade, where we have the stock price intraday showing us at least, we'll assume, a bogus trade of zero.”
Nesto calling these trades “bogus” drew backlash from the host and CNBC veteran Maria Bartiromo, who said those trades sounded like “market manipulation” to her.
“ That is ridiculous,” Bartiromo replied. “I mean this really sounds like market manipulation to me. This is outrageous.”
According to Nesto, these are frequent occurrences, at least at the NASDAQ exchange and if you make a trade a lose money, there’s no recourse.
“It happens a lot, Maria. It really does. I mean, we could probably ask the NASDAQ, they may not want to say how often it happens, but it happens frequently. And they go back and they correct. And the thing that stinks is if you in good faith put in a trade and made money and then lost it, you lose it. And there's no recourse and there's no way to appeal.”
CNBC's Bartiromo: 'That is Ridiculous. This Really Sounds Like Market Manipulation to Me' 6 May 2010 (Business & Media Institute) http://tinyurl.com/2ambw3x
Feds trace flash crash to Chicago
7 May 2010, by Eamon Javers (Politico)
http://www.politico.com/news/stories/0510/36946.html
Federal investigators probing the “flash crash” that briefly sliced nearly 1,000 points off the Dow Thursday are zeroing in on a series of “unusually high-volume” trades in S&P futures that originated in Chicago, a government official told POLITICO.
Those trades set off a chain reaction of trades that caused the biggest drop within a single day in the Dow Jones Industrial Average’s storied history.
Officials at the Securities and Exchange Commission and the Commodity Futures Trading Commission briefed Washington policymakers late Friday on their theory of what triggered the plunge.
According to the government official, investigators have traced the calamity back to the trades in Chicago, which were picked up by automated trading computers in New York. The New York computers in turn issued a series of sell orders, which had a cascading effect on the Dow as even more programs picked up on the trading and issued their own sell orders.
When the New York Stock Exchange slowed down its computerized trading in response to the sell-off, sellers turned to other exchanges. That increased volatility in the markets was in turn picked up by computerized algorithms, which executed even more sell orders.
“They can see on the tape what made it more volatile,” the government official said. “They can see what the accelerators were. What they don’t know is what set the whole chain in motion. They’re still a few links in the chain away from that.”
The decision by the NYSE to slow down trading Thursday has set off a furious debate between the exchanges over what would have been the right course of action in response to the market drop.
And the breathtaking 1,000-point drop has also heightened calls to regulate so-called high frequency trading, in which buyers and sellers use ultrafast computers to trade in and out of stocks in fractions of a second. Critics say such lightning-quick trading increases volatility in the market and can make a sell-off much worse in a crisis.
Democratic Sens. Mark Warner of Virginia and Ted Kaufman of Delaware on Friday proposed adding language to the Senate’s Wall Street reform bill calling on the SEC and CFTC to report back to Congress within 60 days on the causes of the 1,000-point drop and to look into the risks of such high-frequency trading.
On Thursday, the market recovered to lose 350 points. The Dow lost almost 140 points on Friday, to close at 10,380.
The Securities and Exchange Commission and the Commodity Futures Trading Commission released a statement Friday after markets closed.
“We are continuing to review the unusual trading activity that took place briefly yesterday afternoon to pinpoint its cause and contributing factors,” the statement said. “Our market oversight units are reviewing trading and market data from the exchanges, self-regulatory organizations and market participants to examine yesterday's unusual trading activity. We are scrutinizing the extent to which disparate trading conventions and rules across various markets may have contributed to the spike in volatility.”
“Thursday’s unusual trading activity included extreme volatility for a number of individual securities. This is inconsistent with the effective functioning of our capital markets, and we will make whatever structural or other changes are needed.”
Feds trace flash crash to Chicago 7 May 2010 (Politico) http://tinyurl.com/37x2za8
.7 May 2010, by Eamon Javers (Politico)
http://www.politico.com/news/stories/0510/36946.html
Federal investigators probing the “flash crash” that briefly sliced nearly 1,000 points off the Dow Thursday are zeroing in on a series of “unusually high-volume” trades in S&P futures that originated in Chicago, a government official told POLITICO.
Those trades set off a chain reaction of trades that caused the biggest drop within a single day in the Dow Jones Industrial Average’s storied history.
Officials at the Securities and Exchange Commission and the Commodity Futures Trading Commission briefed Washington policymakers late Friday on their theory of what triggered the plunge.
According to the government official, investigators have traced the calamity back to the trades in Chicago, which were picked up by automated trading computers in New York. The New York computers in turn issued a series of sell orders, which had a cascading effect on the Dow as even more programs picked up on the trading and issued their own sell orders.
When the New York Stock Exchange slowed down its computerized trading in response to the sell-off, sellers turned to other exchanges. That increased volatility in the markets was in turn picked up by computerized algorithms, which executed even more sell orders.
“They can see on the tape what made it more volatile,” the government official said. “They can see what the accelerators were. What they don’t know is what set the whole chain in motion. They’re still a few links in the chain away from that.”
The decision by the NYSE to slow down trading Thursday has set off a furious debate between the exchanges over what would have been the right course of action in response to the market drop.
And the breathtaking 1,000-point drop has also heightened calls to regulate so-called high frequency trading, in which buyers and sellers use ultrafast computers to trade in and out of stocks in fractions of a second. Critics say such lightning-quick trading increases volatility in the market and can make a sell-off much worse in a crisis.
Democratic Sens. Mark Warner of Virginia and Ted Kaufman of Delaware on Friday proposed adding language to the Senate’s Wall Street reform bill calling on the SEC and CFTC to report back to Congress within 60 days on the causes of the 1,000-point drop and to look into the risks of such high-frequency trading.
On Thursday, the market recovered to lose 350 points. The Dow lost almost 140 points on Friday, to close at 10,380.
The Securities and Exchange Commission and the Commodity Futures Trading Commission released a statement Friday after markets closed.
“We are continuing to review the unusual trading activity that took place briefly yesterday afternoon to pinpoint its cause and contributing factors,” the statement said. “Our market oversight units are reviewing trading and market data from the exchanges, self-regulatory organizations and market participants to examine yesterday's unusual trading activity. We are scrutinizing the extent to which disparate trading conventions and rules across various markets may have contributed to the spike in volatility.”
“Thursday’s unusual trading activity included extreme volatility for a number of individual securities. This is inconsistent with the effective functioning of our capital markets, and we will make whatever structural or other changes are needed.”
Feds trace flash crash to Chicago 7 May 2010 (Politico) http://tinyurl.com/37x2za8
5/7/10 12:40pm - Plunge of 998 points called error? Proof it's rigged
http://www.youtube.com/watch?v=TxakCXDdscM
The Dow 30 - Intra Day charts for each stock on the volatile Thursday (05_06_2010).mp4
http://www.youtube.com/watch?v=GAN0y3ubJf4
.http://www.youtube.com/watch?v=TxakCXDdscM
The Dow 30 - Intra Day charts for each stock on the volatile Thursday (05_06_2010).mp4
http://www.youtube.com/watch?v=GAN0y3ubJf4
Stock Market Collapse: More Goldman Market Rigging?
7 May 2010, by Ellen Brown (The Huffington Post)
http://www.huffingtonpost.com/ellen-brown/stock-market-collapse-mor_b_568164.html
Last week, Goldman Sachs was on the congressional hot seat, grilled for fraud in its sale of complicated financial products called "synthetic CDOs." This week the heat was off, as all eyes turned to the attack of the shorts on Greek sovereign debt and the dire threat of a sovereign Greek default. By Thursday, Goldman's fraud had slipped from the headlines and Congress had been cowed into throwing in the towel on its campaign to break up the too-big-to-fail banks. On Friday, Goldman was in settlement talks with the SEC.
Goldman and Wall Street reign. Congress appears helpless to discipline the big banks, just as the European Central Bank appears helpless to prevent the collapse of the European Union. . . . Or are they?
Suspicious Market Maneuverings
The shorts circled like sharks in the Greek bond market, following a highly suspicious downgrade of Greek debt by Moody's on Monday. Ratings by private ratings agencies, long suspected of being in the pocket of Wall Street, often seem to be timed to cause stocks or bonds to jump or tumble, causing extreme reactions in the market. The Greek downgrade was suspicious and unexpected because the European Central Bank and International Monetary Fund had just pledged 120 billion Euros to avoid a debt default in Greece.
Markets were roiled further on Thursday, when the U.S. stock market suddenly lost 999 points, and just as suddenly recovered two-thirds of that loss. It appeared to be such a clear case of tampering that Maria Bartiromo blurted out on CNBC, "That is ridiculous. This really sounds like market manipulation to me."
Manipulation by whom? Markets can be rigged with computers using high-frequency trading programs (HFT), which now compose 70% of market trading; and Goldman Sachs is the undisputed leader in this new gaming technique. Matt Taibbi maintains that Goldman Sachs has been "engineering every market manipulation since the Great Depression." When Goldman does not get its way, it is in a position to throw a tantrum and crash the market. It can do this with automated market making technologies like the one invented by Max Keiser, which he claims is now being used to turbocharge market manipulation.
Goldman was an investment firm until September 2008, when it became a "bank holding company" overnight in order to capitalize on the bank bailout, including borrowing virtually interest-free from the Federal Reserve and other banks. In January, when President Obama backed Paul Volcker in his plan to reinstate a form of the Glass-Steagall Act that would separate investment banking from commercial banking, the market collapsed on cue, and the Volcker Rule faded from the headlines.
When Goldman got dragged before Congress and the SEC in April, the Greek crisis arose as a "counterpoint," diverting attention to that growing conflagration. Greece appears to be the sacrificial play in the EU just as Lehman Brothers was in the U.S., "the hostage the kidnappers shoot to prove they mean business."
The Nuclear Option
It is still possible, however, for the European Central Bank to snatch Greece from the fire and rout the shorts. It can do this with what has been called the nuclear option -- "monetizing" the debt of Greece and other debt-laden EU countries by effectively "printing money" (quantitative easing) and buying the debt itself at very low interest rates. This is called the "nuclear option" because it would blow up the hedge funds and electronic sharks operated by Goldman and other Wall Street heavies, which specialize in bringing down corporations and whole countries for strategic and exploitative ends.
Will the ECB proceed with this plan? Perhaps, say some experts. It could just be waiting for the German election on Sunday, which the ECB does not want to appear to be influencing.
Stock Market Collapse: More Goldman Market Rigging? 7 May 2010 (The Huffington Post) http://tinyurl.com/2wd2lnj
.7 May 2010, by Ellen Brown (The Huffington Post)
http://www.huffingtonpost.com/ellen-brown/stock-market-collapse-mor_b_568164.html
Last week, Goldman Sachs was on the congressional hot seat, grilled for fraud in its sale of complicated financial products called "synthetic CDOs." This week the heat was off, as all eyes turned to the attack of the shorts on Greek sovereign debt and the dire threat of a sovereign Greek default. By Thursday, Goldman's fraud had slipped from the headlines and Congress had been cowed into throwing in the towel on its campaign to break up the too-big-to-fail banks. On Friday, Goldman was in settlement talks with the SEC.
Goldman and Wall Street reign. Congress appears helpless to discipline the big banks, just as the European Central Bank appears helpless to prevent the collapse of the European Union. . . . Or are they?
Suspicious Market Maneuverings
The shorts circled like sharks in the Greek bond market, following a highly suspicious downgrade of Greek debt by Moody's on Monday. Ratings by private ratings agencies, long suspected of being in the pocket of Wall Street, often seem to be timed to cause stocks or bonds to jump or tumble, causing extreme reactions in the market. The Greek downgrade was suspicious and unexpected because the European Central Bank and International Monetary Fund had just pledged 120 billion Euros to avoid a debt default in Greece.
Markets were roiled further on Thursday, when the U.S. stock market suddenly lost 999 points, and just as suddenly recovered two-thirds of that loss. It appeared to be such a clear case of tampering that Maria Bartiromo blurted out on CNBC, "That is ridiculous. This really sounds like market manipulation to me."
Manipulation by whom? Markets can be rigged with computers using high-frequency trading programs (HFT), which now compose 70% of market trading; and Goldman Sachs is the undisputed leader in this new gaming technique. Matt Taibbi maintains that Goldman Sachs has been "engineering every market manipulation since the Great Depression." When Goldman does not get its way, it is in a position to throw a tantrum and crash the market. It can do this with automated market making technologies like the one invented by Max Keiser, which he claims is now being used to turbocharge market manipulation.
Goldman was an investment firm until September 2008, when it became a "bank holding company" overnight in order to capitalize on the bank bailout, including borrowing virtually interest-free from the Federal Reserve and other banks. In January, when President Obama backed Paul Volcker in his plan to reinstate a form of the Glass-Steagall Act that would separate investment banking from commercial banking, the market collapsed on cue, and the Volcker Rule faded from the headlines.
When Goldman got dragged before Congress and the SEC in April, the Greek crisis arose as a "counterpoint," diverting attention to that growing conflagration. Greece appears to be the sacrificial play in the EU just as Lehman Brothers was in the U.S., "the hostage the kidnappers shoot to prove they mean business."
The Nuclear Option
It is still possible, however, for the European Central Bank to snatch Greece from the fire and rout the shorts. It can do this with what has been called the nuclear option -- "monetizing" the debt of Greece and other debt-laden EU countries by effectively "printing money" (quantitative easing) and buying the debt itself at very low interest rates. This is called the "nuclear option" because it would blow up the hedge funds and electronic sharks operated by Goldman and other Wall Street heavies, which specialize in bringing down corporations and whole countries for strategic and exploitative ends.
Will the ECB proceed with this plan? Perhaps, say some experts. It could just be waiting for the German election on Sunday, which the ECB does not want to appear to be influencing.
Stock Market Collapse: More Goldman Market Rigging? 7 May 2010 (The Huffington Post) http://tinyurl.com/2wd2lnj
[OTE53] On the Edge with Ellen Brown
8 May 2010, Max & Stacy (maxkeiser.com)
http://maxkeiser.com/2010/05/08/ote53-on-the-edge-with-ellen-brown/
Stacy Summary: On the Edge; guest is Ellen Brown to talk about High Frequency Trading and more.
Press TV-On The Edge With Max Keiser-05-07-2010(Part1)
http://www.youtube.com/watch?v=V5G7zBWMpIs
Press TV-On The Edge With Max Keiser-05-07-2010(Part2)
http://www.youtube.com/watch?v=st18z-ifoPs
Press TV-On The Edge With Max Keiser-05-07-2010(Part3)
http://www.youtube.com/watch?v=rKSzatYss20
.8 May 2010, Max & Stacy (maxkeiser.com)
http://maxkeiser.com/2010/05/08/ote53-on-the-edge-with-ellen-brown/
Stacy Summary: On the Edge; guest is Ellen Brown to talk about High Frequency Trading and more.
Press TV-On The Edge With Max Keiser-05-07-2010(Part1)
http://www.youtube.com/watch?v=V5G7zBWMpIs
Press TV-On The Edge With Max Keiser-05-07-2010(Part2)
http://www.youtube.com/watch?v=st18z-ifoPs
Press TV-On The Edge With Max Keiser-05-07-2010(Part3)
http://www.youtube.com/watch?v=rKSzatYss20
Where Was Goldman's Supplementary Liquidity Provider Team Yesterday?
A Recap Of Goldman's Program Trading Monopoly
7 May 2010, by Tyler Durden (ZeroHedge)
http://www.zerohedge.com/article/where-was-goldmans-supplementary-liquidity-provider-team-yesterday-recap-goldmans-program-tr
Where Was Goldman's Supplementary Liquidity Provider Team Yesterday? 7 May 2010 (ZeroHedge) http://tinyurl.com/2ahj69h
A Recap Of Goldman's Program Trading Monopoly
7 May 2010, by Tyler Durden (ZeroHedge)
http://www.zerohedge.com/article/where-was-goldmans-supplementary-liquidity-provider-team-yesterday-recap-goldmans-program-tr
Where Was Goldman's Supplementary Liquidity Provider Team Yesterday? 7 May 2010 (ZeroHedge) http://tinyurl.com/2ahj69h
MUST HEAR: Panic And Loathing From The S&P 500 Pits
7 May 2010, by Tyler Durden (Zero Hedge)
http://www.zerohedge.com/article/panic-and-loathing-sp-500-pits
"Guys this is probably the craziest I have seen it down here ever." Here it is, memorialized for the generations and away from the now openly ridiculous disinformation propaganda of the mainstream media, just what a full market meltdown panic sounds like: straight from the epicenter, the S&P 500 pits. Luckily open ouctry still exists, if at least for shock value.
Click here for a first hand account of the most shocking 15 minutes in recent market history: MP3 Download Direct: http://www.zerohedge.com/sites/default/files/Market%20Crash.mp3
Fat finger my ass.
h/t Tim
MUST HEAR: Panic And Loathing From The S&P 500 Pits 7 May 2010 (Zero Hedge) http://tinyurl.com/35d22nw
.7 May 2010, by Tyler Durden (Zero Hedge)
http://www.zerohedge.com/article/panic-and-loathing-sp-500-pits
"Guys this is probably the craziest I have seen it down here ever." Here it is, memorialized for the generations and away from the now openly ridiculous disinformation propaganda of the mainstream media, just what a full market meltdown panic sounds like: straight from the epicenter, the S&P 500 pits. Luckily open ouctry still exists, if at least for shock value.
Click here for a first hand account of the most shocking 15 minutes in recent market history: MP3 Download Direct: http://www.zerohedge.com/sites/default/files/Market%20Crash.mp3
Fat finger my ass.
h/t Tim
MUST HEAR: Panic And Loathing From The S&P 500 Pits 7 May 2010 (Zero Hedge) http://tinyurl.com/35d22nw
SEC Said to Consider New Rules as Market Drop Probed (Update1) (WTF Thay are allready doing that?!!)
8 May 2010, by Jesse Westbrook (Bloomberg)
http://www.bloomberg.com/apps/news?pid=20601070&sid=aRxPqkzPF3G8
May 8 (Bloomberg) -- The U.S. Securities and Exchange Commission is considering regulatory changes aimed at slowing stock trading during periods of cascading prices, even though the agency hasn’t yet concluded what caused this week’s market plunge, two people familiar with the matter said.
SEC officials are weighing whether uniform trading curbs should be imposed across markets for companies that have fallen a certain percentage, said the people, who declined to be identified because the discussions are preliminary. The agency is examining whether any rules should include a time element because a steep decline that occurs in minutes may be more detrimental to markets than a decline over several hours, one of the people said.
U.S. regulators and exchanges are trying to determine what happened after stocks fell May 6, temporarily erasing more than $1 trillion in market value, in a rout fueled by waves of computerized trading. The SEC and Commodity Futures Trading Commission said in a joint statement yesterday that declines for individual stocks were “inconsistent” with well-functioning markets and pledged to make “structural” changes if necessary.
SEC spokesman John Nester declined to comment on internal agency discussions. Lawmakers are pressing the SEC for answers.
“Yesterday’s flash crash was incredibly startling,” Representative Paul Kanjorski said in a statement, announcing a May 11 hearing to examine the incident. “We cannot allow technological problems, regulatory loopholes, or human blunders to spook the markets and cause panic.”
Computer Glitch
Kanjorski, a Pennsylvania Democrat, also sent a letter to SEC Chairman Mary Schapiro seeking the agency’s views on the incident and asking what power it has to prevent future crashes.
While the SEC is in the early stages of reviewing market data, the agency hasn’t found evidence indicating that an erroneous trade or a computer glitch triggered the market rout, one of the people said.
CNBC citied “multiple sources” in reporting May 6 that New York-based Citigroup Inc. may have made a mistake in entering a transaction that contributed to the plunge. Citigroup said it found no evidence it was involved in an erroneous trade, a finding supported by futures market CME Group Inc.
“Based on our review, rumors about a trading error by Citi are unfounded,” said Citigroup spokeswoman Danielle Romero- Apsilos.
Washington Briefing
SEC officials have internally circulated at least two memos outlining market mechanisms suspected of triggering or fueling the market decline, a person familiar with the discussions said.
One memo, circulated two days ago, outlines a scenario described publicly by stock-exchange officials, people who saw the document said. The theory advanced by the other memo couldn’t be determined.
SEC commissioners were scheduled to be briefed on the incident yesterday by the agency’s trading and markets division in Washington, the people said.
One SEC memo, according to people who saw it, discusses a theory raised yesterday by NYSE Euronext spokesman Ray Pellecchia, who said sudden price moves in multiple stocks reached so-called liquidity replenishment points. That prompted the exchange to slow trading in those shares as it tried to ensure an orderly market. Such incidences allow other exchanges to ignore NYSE price quotes.
Uniform Practices
Trades sent to electronic networks then fueled the drop, said Larry Leibowitz, chief operating officer of NYSE Euronext. While the first half of the Dow Jones Industrial Average’s 998.5-point plunge probably reflected normal trading, the decline snowballed as orders went to venues lacking liquidity to match them, he said in an interview yesterday.
NYSE competitors such as Nasdaq OMX Group Inc. don’t use liquidity replenishment points. The SEC and CFTC in their joint statement raised concerns that the plunge may have been caused by exchanges not adhering to uniform practices.
“We are scrutinizing the extent to which disparate trading conventions and rules across markets may have contributed to the spike in volatility,” the regulators said. Ideas under discussion would make sure all trading platforms follow the same policies when prices fall precipitously.
A circuit breaker for individual stocks across all markets would avoid the problem of individual markets making their own decisions about trading, said Brett Mock, chairman of the Security Traders Association, a trade group of brokers and asset management companies based in Darien, Connecticut.
Increased Competition
The SEC and CFTC said their market oversight units are continuing to review trading data and will make findings public. The SEC’s enforcement division, which investigates violations of securities rules, will also try to determine if market participants exploited the turmoil to profit illegally, two people with direct knowledge of the matter said.
Increasing competition has eroded NYSE and Nasdaq’s trading volume. Less than 30 percent of transactions in NYSE and Nasdaq listed companies takes place on their networks with orders dispersed to as many as 50 venues. Most rival platforms are fully electronic.
Lawmakers including U.S. Senator Ted Kaufman, a Delaware Democrat, have urged the SEC since last year to increase regulation of markets that rely on computer algorithms to execute thousands of trades in seconds. Kaufman, who has raised concerns about potential manipulation or false trades triggering a crisis, urged the SEC this week to step up its oversight.
“No one knows what is happening in the exchanges when this trading is going on,” he said on the Senate floor May 6 after the market plunge. “All we have been requesting from the Securities and Exchange Commission is that they take a look at what is happening.”
To contact the reporter on this story: Jesse Westbrook in Washington at jwestbrook1@bloomberg.net.
SEC Said to Consider New Rules as Market Drop Probed 8 May 2010 (Bloomberg) http://tinyurl.com/34jurwt
.[1125] The Truth About Markets – Resonance 104.4 FM – 08 May 20108 May 2010, by Jesse Westbrook (Bloomberg)
http://www.bloomberg.com/apps/news?pid=20601070&sid=aRxPqkzPF3G8
May 8 (Bloomberg) -- The U.S. Securities and Exchange Commission is considering regulatory changes aimed at slowing stock trading during periods of cascading prices, even though the agency hasn’t yet concluded what caused this week’s market plunge, two people familiar with the matter said.
SEC officials are weighing whether uniform trading curbs should be imposed across markets for companies that have fallen a certain percentage, said the people, who declined to be identified because the discussions are preliminary. The agency is examining whether any rules should include a time element because a steep decline that occurs in minutes may be more detrimental to markets than a decline over several hours, one of the people said.
U.S. regulators and exchanges are trying to determine what happened after stocks fell May 6, temporarily erasing more than $1 trillion in market value, in a rout fueled by waves of computerized trading. The SEC and Commodity Futures Trading Commission said in a joint statement yesterday that declines for individual stocks were “inconsistent” with well-functioning markets and pledged to make “structural” changes if necessary.
SEC spokesman John Nester declined to comment on internal agency discussions. Lawmakers are pressing the SEC for answers.
“Yesterday’s flash crash was incredibly startling,” Representative Paul Kanjorski said in a statement, announcing a May 11 hearing to examine the incident. “We cannot allow technological problems, regulatory loopholes, or human blunders to spook the markets and cause panic.”
Computer Glitch
Kanjorski, a Pennsylvania Democrat, also sent a letter to SEC Chairman Mary Schapiro seeking the agency’s views on the incident and asking what power it has to prevent future crashes.
While the SEC is in the early stages of reviewing market data, the agency hasn’t found evidence indicating that an erroneous trade or a computer glitch triggered the market rout, one of the people said.
CNBC citied “multiple sources” in reporting May 6 that New York-based Citigroup Inc. may have made a mistake in entering a transaction that contributed to the plunge. Citigroup said it found no evidence it was involved in an erroneous trade, a finding supported by futures market CME Group Inc.
“Based on our review, rumors about a trading error by Citi are unfounded,” said Citigroup spokeswoman Danielle Romero- Apsilos.
Washington Briefing
SEC officials have internally circulated at least two memos outlining market mechanisms suspected of triggering or fueling the market decline, a person familiar with the discussions said.
One memo, circulated two days ago, outlines a scenario described publicly by stock-exchange officials, people who saw the document said. The theory advanced by the other memo couldn’t be determined.
SEC commissioners were scheduled to be briefed on the incident yesterday by the agency’s trading and markets division in Washington, the people said.
One SEC memo, according to people who saw it, discusses a theory raised yesterday by NYSE Euronext spokesman Ray Pellecchia, who said sudden price moves in multiple stocks reached so-called liquidity replenishment points. That prompted the exchange to slow trading in those shares as it tried to ensure an orderly market. Such incidences allow other exchanges to ignore NYSE price quotes.
Uniform Practices
Trades sent to electronic networks then fueled the drop, said Larry Leibowitz, chief operating officer of NYSE Euronext. While the first half of the Dow Jones Industrial Average’s 998.5-point plunge probably reflected normal trading, the decline snowballed as orders went to venues lacking liquidity to match them, he said in an interview yesterday.
NYSE competitors such as Nasdaq OMX Group Inc. don’t use liquidity replenishment points. The SEC and CFTC in their joint statement raised concerns that the plunge may have been caused by exchanges not adhering to uniform practices.
“We are scrutinizing the extent to which disparate trading conventions and rules across markets may have contributed to the spike in volatility,” the regulators said. Ideas under discussion would make sure all trading platforms follow the same policies when prices fall precipitously.
A circuit breaker for individual stocks across all markets would avoid the problem of individual markets making their own decisions about trading, said Brett Mock, chairman of the Security Traders Association, a trade group of brokers and asset management companies based in Darien, Connecticut.
Increased Competition
The SEC and CFTC said their market oversight units are continuing to review trading data and will make findings public. The SEC’s enforcement division, which investigates violations of securities rules, will also try to determine if market participants exploited the turmoil to profit illegally, two people with direct knowledge of the matter said.
Increasing competition has eroded NYSE and Nasdaq’s trading volume. Less than 30 percent of transactions in NYSE and Nasdaq listed companies takes place on their networks with orders dispersed to as many as 50 venues. Most rival platforms are fully electronic.
Lawmakers including U.S. Senator Ted Kaufman, a Delaware Democrat, have urged the SEC since last year to increase regulation of markets that rely on computer algorithms to execute thousands of trades in seconds. Kaufman, who has raised concerns about potential manipulation or false trades triggering a crisis, urged the SEC this week to step up its oversight.
“No one knows what is happening in the exchanges when this trading is going on,” he said on the Senate floor May 6 after the market plunge. “All we have been requesting from the Securities and Exchange Commission is that they take a look at what is happening.”
To contact the reporter on this story: Jesse Westbrook in Washington at jwestbrook1@bloomberg.net.
SEC Said to Consider New Rules as Market Drop Probed 8 May 2010 (Bloomberg) http://tinyurl.com/34jurwt
http://maxkeiser.com/2010/05/08/1125-the-truth-about-markets-resonance-104-4-fm-08-may-2010/
Download show here MP3: http://ia331209.us.archive.org/2/items/MaxKeiserRadio-TheTruthAboutMarkets-08May2010/tam080610-full.mp3
Max Talks about High Frequency Trading and Market Manipulation
Max Worked on Wall Street Himself and know all of their tricks, Look back Trading, Peek-a-boo accounting etc..
Max is also the inventor of "Virtual Specialist Technology" - a software system used by the Hollywood Stock Exchange.
.
Hedge fund manipulation, not error, was behind market plunge
7 May 2010, by Cliff Kincaid (World Tribune)
http://www.worldtribune.com/worldtribune/WTARC/2010/ss_economy0389_05_07.asp
The major media say the chaos on Wall Street was the result of a “trader error, possibly a typo,” as the Washington Post put it. Some reports claim the culprit was a “fat finger” on a computer somewhere that pressed the wrong key. But Zubi Diamond, author of the Wizards of Wall Street, says these claims are all lies. “What happened in the market on Thursday is a typical example of pure market manipulation” by unregulated hedge fund short sellers.
His book, whose subtitle refers to the scam that elected Barack Obama, warns that the same hedge fund short sellers were behind the financial crash of 2008 that paved the way for Obama’s election to the presidency.
Diamond says the historic market plunge on Thursday was “due to computerized hedge fund short selling because there is no protection for the invested capital in the equity markets. There is no uptick rule, no circuit breakers and no trading curbs. Our market is primed for manipulation.”
Diamond is referring to financial regulations, which have been repealed, designed to prevent market manipulation.
Diamond has been adamant in his view that the financial reform bill being pushed by Obama and liberal Democrats on Capitol Hill will do nothing to solve this problem and regulate the hedge fund short sellers.
“No one will come on TV to tell the truth,” he complained. Instead, he says representatives and apologists for the hedge fund short sellers, who operate as the Managed Funds Association (MFA), “go on TV and provide false explanation of what happened.”
Diamond says these false explanations include claims of trader error and computerized glitches.
An example of Horatio Alger’s legendary rise from rags to riches, Diamond came from Africa to the U.S. and became a successful businessman, stock market investor and trader. He has about 15 years of financial market experience and more than 23 years experience as an entrepreneur.
Diamond says that the repeal of the safeguard regulations, such as the uptick rule, circuit breakers and trading curbs, and the introduction of the short ETFs (Exchange traded funds), which began under Christopher Cox at the Securities and Exchange Commission, has given the members of the MFA tremendous power and influence. He says these individuals include George Soros, John Paulson, Jim Chanos, James Simon, and other hedge fund short sellers, including those who operate Quant Funds and engage in computerized trading.
“They have the ability to manipulate U.S. and some international markets,” he says. Indeed, Diamond maintains that the MFA has basically taken control of the U.S. stock market.
My March 4, column, “Who’s Behind the Financial Crisis?,” quoted Diamond as then warning that any asset class that is traded in the NYSE, CME, or EUREX exchanges “is susceptible to manipulation by the members of Managed Funds Association and their strategic partners.”
In a previous column for AIM, commenting on the so-called financial reform bill now before Congress, he explained, “The only financial reform needed today is to regulate and monitor the hedge funds and the hedge fund short sellers, some of them which are registered off-shore to avoid scrutiny. These global operators, with investors who remain mostly anonymous, must be compelled to register with the Securities and Exchange Commission (SEC), publicly disclose their positions in the markets, and maintain accounting and trading records for a period of 10 years so their activities can be monitored and scrutinized. Just like mutual funds, they must be prohibited from engaging in day trading activities.”
“What happened on Thursday happens to a select group of individual stocks on a daily basis as the hedge fund short sellers prey on common investors,” he asserted. “They are now expanding the manipulation to include the whole market. They can now crash the market, panic shareholders out of their stocks, buy to cover their short positions for hefty shorting profits, and then buy back in at the bottom to open long positions and then recover the whole market (indexes) to normal levels.”
These market manipulators, he notes, have the ability to drive prices down and then drive them back up, all within a 15 minute period. “How’s that for no-risk investing?” he says. “They make money through stock price volatility and market volatility. They manipulate stock prices through unrestricted short selling.”
Diamond said that one stock, Accenture, with the ticker symbol ACN, dropped from $44 dollars to .01 cent per share within 15 minutes, and recovered back to $41.00 dollars. Apple computer ticker symbol AAPL dropped 60 points in 15 minutes. It went from $258 down to $199 and then recovered to $248. All of this happened within a 15-minute period.
All of this is possible, he says, because there is no uptick rule, no circuit breaker and no trading curbs. All of these regulations were repealed, meaning that the risk and fear of investing have been transferred solely to the common investors “as the hedge fund short sellers operate with impunity looting the invested capital of American families,” he explains.
“What happened on Thursday will happen again,” he adds. “They are getting bolder every day. The hedge fund short sellers, who are members of Managed Funds Association, and their strategic partners at the different stock exchanges, are responsible for the scam that was perpetrated on Thursday.”
“The market plunged and recovered,” he says. “The carnage and destruction of investor’s capital was therefore concealed.”
“This is the evil of hedge fund short selling in an unregulated market,” he says.
Hedge fund manipulation, not error, was behind market plunge 7 May 2010 (World Tribune) http://tinyurl.com/2v62h5h
.7 May 2010, by Cliff Kincaid (World Tribune)
http://www.worldtribune.com/worldtribune/WTARC/2010/ss_economy0389_05_07.asp
The major media say the chaos on Wall Street was the result of a “trader error, possibly a typo,” as the Washington Post put it. Some reports claim the culprit was a “fat finger” on a computer somewhere that pressed the wrong key. But Zubi Diamond, author of the Wizards of Wall Street, says these claims are all lies. “What happened in the market on Thursday is a typical example of pure market manipulation” by unregulated hedge fund short sellers.
His book, whose subtitle refers to the scam that elected Barack Obama, warns that the same hedge fund short sellers were behind the financial crash of 2008 that paved the way for Obama’s election to the presidency.
Diamond says the historic market plunge on Thursday was “due to computerized hedge fund short selling because there is no protection for the invested capital in the equity markets. There is no uptick rule, no circuit breakers and no trading curbs. Our market is primed for manipulation.”
Diamond is referring to financial regulations, which have been repealed, designed to prevent market manipulation.
Diamond has been adamant in his view that the financial reform bill being pushed by Obama and liberal Democrats on Capitol Hill will do nothing to solve this problem and regulate the hedge fund short sellers.
“No one will come on TV to tell the truth,” he complained. Instead, he says representatives and apologists for the hedge fund short sellers, who operate as the Managed Funds Association (MFA), “go on TV and provide false explanation of what happened.”
Diamond says these false explanations include claims of trader error and computerized glitches.
An example of Horatio Alger’s legendary rise from rags to riches, Diamond came from Africa to the U.S. and became a successful businessman, stock market investor and trader. He has about 15 years of financial market experience and more than 23 years experience as an entrepreneur.
Diamond says that the repeal of the safeguard regulations, such as the uptick rule, circuit breakers and trading curbs, and the introduction of the short ETFs (Exchange traded funds), which began under Christopher Cox at the Securities and Exchange Commission, has given the members of the MFA tremendous power and influence. He says these individuals include George Soros, John Paulson, Jim Chanos, James Simon, and other hedge fund short sellers, including those who operate Quant Funds and engage in computerized trading.
“They have the ability to manipulate U.S. and some international markets,” he says. Indeed, Diamond maintains that the MFA has basically taken control of the U.S. stock market.
My March 4, column, “Who’s Behind the Financial Crisis?,” quoted Diamond as then warning that any asset class that is traded in the NYSE, CME, or EUREX exchanges “is susceptible to manipulation by the members of Managed Funds Association and their strategic partners.”
In a previous column for AIM, commenting on the so-called financial reform bill now before Congress, he explained, “The only financial reform needed today is to regulate and monitor the hedge funds and the hedge fund short sellers, some of them which are registered off-shore to avoid scrutiny. These global operators, with investors who remain mostly anonymous, must be compelled to register with the Securities and Exchange Commission (SEC), publicly disclose their positions in the markets, and maintain accounting and trading records for a period of 10 years so their activities can be monitored and scrutinized. Just like mutual funds, they must be prohibited from engaging in day trading activities.”
“What happened on Thursday happens to a select group of individual stocks on a daily basis as the hedge fund short sellers prey on common investors,” he asserted. “They are now expanding the manipulation to include the whole market. They can now crash the market, panic shareholders out of their stocks, buy to cover their short positions for hefty shorting profits, and then buy back in at the bottom to open long positions and then recover the whole market (indexes) to normal levels.”
These market manipulators, he notes, have the ability to drive prices down and then drive them back up, all within a 15 minute period. “How’s that for no-risk investing?” he says. “They make money through stock price volatility and market volatility. They manipulate stock prices through unrestricted short selling.”
Diamond said that one stock, Accenture, with the ticker symbol ACN, dropped from $44 dollars to .01 cent per share within 15 minutes, and recovered back to $41.00 dollars. Apple computer ticker symbol AAPL dropped 60 points in 15 minutes. It went from $258 down to $199 and then recovered to $248. All of this happened within a 15-minute period.
All of this is possible, he says, because there is no uptick rule, no circuit breaker and no trading curbs. All of these regulations were repealed, meaning that the risk and fear of investing have been transferred solely to the common investors “as the hedge fund short sellers operate with impunity looting the invested capital of American families,” he explains.
“What happened on Thursday will happen again,” he adds. “They are getting bolder every day. The hedge fund short sellers, who are members of Managed Funds Association, and their strategic partners at the different stock exchanges, are responsible for the scam that was perpetrated on Thursday.”
“The market plunged and recovered,” he says. “The carnage and destruction of investor’s capital was therefore concealed.”
“This is the evil of hedge fund short selling in an unregulated market,” he says.
Hedge fund manipulation, not error, was behind market plunge 7 May 2010 (World Tribune) http://tinyurl.com/2v62h5h
Harris's Ablin Discusses U.S. Equity-Trading Systems: Video
http://www.youtube.com/watch?v=kpXzTQb9IEM
"HFT - High Frequency Trading accounts for 2/3 of the daily volume frontrunning the normal investors"
.Interesting comment on: CEO of the NYSE explains what caused the drop in the market on 6 May 2010 http://www.youtube.com/watch?v=Up5XtW7kM_chttp://www.youtube.com/watch?v=kpXzTQb9IEM
"HFT - High Frequency Trading accounts for 2/3 of the daily volume frontrunning the normal investors"
TheCashistrash: this guy is illuminati you can tell by the hand signals he uses on 1:52 & 3:59 he knows exactly what happened it was market manipulation to strongly encourage germany to pass the stimulus package and for greece to pass the austerity package.
The best thing greece could have done was default on their obligations.
.Bilderberg Manipulated Stock Market Crash
9 May 2010, NoWorldSystem (Infowars)
http://www.infowars.com/bilderberg-manipulated-stock-market-crash/
Annual Elite Conclave, 58th Bilderberg Meeting to be held in Greece, May 14-17
(Canada Free Press)
http://canadafreepress.com/index.php/article/10854
According to Estulin’s sources, here are a few of the talking points and concerns for this year’s Bilderberg meeting in Greece:
* The future of the US dollar and US economy: The plan is for the Bilderberg Group players, through their allies in Washington and Wall Street to continue to deceive millions of savers and investors who believe the hype about the supposed up-turn in the economy. They are about to be set up for massive losses and searing financial pain in the months ahead. The bank “stress tests” now being conducted by Washington are little more than a shameless hoax: Based on the irrational assumption that the economy won’t get as bad as it already is!
* US unemployment: Solutions and assumptions (Stated as such in the pre-meeting booklet sent out to attendees.) Bilderberg is quietly assuming that US unemployment numbers will hover around 14% by the end of this year, far higher than the official numbers released by the US government.
* Depression or a prolonged stagnation? (Stated as such in the pre-meeting booklet sent out to attendees.) Bilderberg is looking at two options: Either a prolonged, agonizing depression that dooms the world to decades of stagnation, decline, and poverty … or an intense-but-shorter depression that paves the way for a new sustainable economic world order, with less sovereignty but more efficiency.
* There will be a final push for the enactment of Lisbon Treaty, pending on Irish voting YES on the treaty in Sept or October. One of their concerns is addressing and neutralizing the anti-Lisbon treaty movement called “Libertas” led by Declan Ganley. One of the Bilderberger planned moves is to use a whispering campaign in the US media suggested that Ganley is being funded by arms dealers in the US linked to the US military.
.Duncan Niederauer on the Fall again
7 May 2010, (CNBC)
http://www.cnbc.com/id/15840232/?video=1487758629&play=1
NYSE Euronext CEO Duncan Niederauer tries to make sense of yesterday’s events, including the role technology played in the market’s precipitous fall.
.
Market Crash - 06 May 2010 - S&P Pit
http://www.archive.org/details/MarketCrash-06May2010-SpPit
.http://www.archive.org/details/MarketCrash-06May2010-SpPit
SEC: Stock Exchanges Agree To Changes To Prevent Another Market ‘Glitch’
10 May 2010, (The Huffington Post)
http://www.huffingtonpost.com/2010/05/10/sec-stock-exchanges-agree_n_570483.html
WASHINGTON -- Federal regulators say leaders for major securities exchanges have agreed in principle to a uniform system of "circuit breakers" that would slow trading during periods of intense market volatility.
The heads of the biggest exchanges "agreed on a structural framework, to be refined over the next day," Securities and Exchange Commission Chairman Mary Schapiro says.
The agreement has been reached by leaders of six exchanges, including the New York Stock Exchange and NASDAQ.
The absence of a uniform system is being looked at as a possible trigger for last week's historic stock market plunge.
In an effort to calm Thursday's rapid market swings, the New York Stock Exchange invoked a measure to slow trading. Some analysts believe that drove trades onto other electronic exchanges, which didn't slow trading. That left fewer buyers and sellers to help set prices, potentially accelerating Thursday's drop.
Financial regulators met with the heads of major exchanges to discuss how conflicting trading rules may have contributed to the market's fall. The meeting was set to continue Monday afternoon with Treasury Secretary Timothy Geithner.
Meeting participants were weighing possible solutions to reconcile the often-conflicting rules written and enforced by different exchanges. Several exchanges, including NYSE and NASDAQ, already have circuit breakers that slow trading when stocks move too fast in either direction. Yet the trigger for those circuit breakers varies from exchange to exchange. That discrepancy can disrupt markets if some exchanges slow trading and others don't, as happened on Thursday.
Streamlining the rules for triggering circuit breakers could prevent another chaotic market drop. One possibility being discussed is for exchanges to simultaneously slow trading of a specific stock if its price moves too quickly, according to a person with knowledge of the talks. Exchanges also are discussing whether the trigger for slowing trading should be based on the rate of percentage change in the value of a stock or its trading volume, according to the person, who spoke on condition of anonymity because he wasn't authorized to publicly discuss the matter.
Regulators and exchanges have been poring over data from millions of trades trying to pinpoint what caused Thursday's massive, computerized sell-off, which at one point had the Dow Jones Industrial Average down by nearly 1,000 points. The Dow later recovered to close the session down 342 points.
The SEC is leading the investigation with the Commodity Futures Trading Commission. Those agencies are ultimately responsible for overseeing markets, but they rely heavily on exchanges to write and enforce their own rules. And the exchanges' rules vary widely, prompting top lawmakers to call for greater consistency.
Sen. Charles Schumer, a New York Democrat and member of the Senate Banking Committee, urged the exchanges to adopt systemwide circuit breakers.
"It appears that our fragmented market structure may very well have contributed to the difficulties we experienced last Thursday. Coordination and consistent safeguards between trading venues – and across markets – is essential," Schumer said in letters to Schapiro, CFTC Chairman Gary Gensler and the heads of all the major stocks and futures exchanges.
Schumer also asked the SEC to put in a new centralized market surveillance system to watch for risk and manipulation across all exchanges and trading platforms.
As regulators seek to understand the root cause of Thursday's dive, they again are relying on the exchanges – this time to flag suspicious trades and help the SEC narrow the focus of its probe.
One reason: Market-wide trading data is not collected in a single location. Instead, each exchange's trades are reported to its designated self-regulator – often part of the same company that owns the exchange.
Regulators now believe the disruption was caused by a toxic, not-yet-understood, feedback loop created when multiple trading schemes interacted, according to people familiar with the situation. That contradicts earlier speculation that the trigger was a small number of erroneous trades.
That means it could take weeks to sort out the problem, said the people, who spoke on condition of anonymity because they were not authorized to discuss the investigation.
High-frequency trading uses mathematical models and computers to buy and sell huge numbers of shares in milliseconds. It accounts for two-thirds of all stock trading in the U.S., and proponents say it makes the stock market run more smoothly by efficiently connecting buyers and sellers.
On Capitol Hill Tuesday, Rep. Paul Kanjorski, D-Pa., will hold a hearing into Thursday's market activity. Kanjorski's subcommittee – which is responsible for overseeing and crafting legislation on capital markets – hasn't held a hearing on flash trading to this point.
Schapiro and Gensler will appear together at the hearing, as will key executives from the NYSE, Nasdaq and Chicago-based CME Group Inc.
The Senate subcommittee that oversees financial markets is preparing to hold its own hearing on the matter in the coming weeks, said a spokesman for Chairman Sen. Jack Reed, D-R.I.
Stocks rocketed higher Monday after European leaders agreed to a nearly $1 trillion rescue plan to avoid a major debt crisis and the U.S. Federal Reserve said it would also provide loans overseas. The Dow Jones industrial average rose more than 340 points in afternoon trading.
___
Wagner reported from Washington. AP Business Writer Marcy Gordon and Associated Press Writer Jim Kuhnhenn contributed to this report.
SEC: Stock Exchanges Agree To Changes To Prevent Another Market ‘Glitch’ 10 May 2010 (The Huffington Post) http://tinyurl.com/32mmu4t
.Dress rehearsal for the fully automated crash10 May 2010, (The Huffington Post)
http://www.huffingtonpost.com/2010/05/10/sec-stock-exchanges-agree_n_570483.html
WASHINGTON -- Federal regulators say leaders for major securities exchanges have agreed in principle to a uniform system of "circuit breakers" that would slow trading during periods of intense market volatility.
The heads of the biggest exchanges "agreed on a structural framework, to be refined over the next day," Securities and Exchange Commission Chairman Mary Schapiro says.
The agreement has been reached by leaders of six exchanges, including the New York Stock Exchange and NASDAQ.
The absence of a uniform system is being looked at as a possible trigger for last week's historic stock market plunge.
In an effort to calm Thursday's rapid market swings, the New York Stock Exchange invoked a measure to slow trading. Some analysts believe that drove trades onto other electronic exchanges, which didn't slow trading. That left fewer buyers and sellers to help set prices, potentially accelerating Thursday's drop.
Financial regulators met with the heads of major exchanges to discuss how conflicting trading rules may have contributed to the market's fall. The meeting was set to continue Monday afternoon with Treasury Secretary Timothy Geithner.
Meeting participants were weighing possible solutions to reconcile the often-conflicting rules written and enforced by different exchanges. Several exchanges, including NYSE and NASDAQ, already have circuit breakers that slow trading when stocks move too fast in either direction. Yet the trigger for those circuit breakers varies from exchange to exchange. That discrepancy can disrupt markets if some exchanges slow trading and others don't, as happened on Thursday.
Streamlining the rules for triggering circuit breakers could prevent another chaotic market drop. One possibility being discussed is for exchanges to simultaneously slow trading of a specific stock if its price moves too quickly, according to a person with knowledge of the talks. Exchanges also are discussing whether the trigger for slowing trading should be based on the rate of percentage change in the value of a stock or its trading volume, according to the person, who spoke on condition of anonymity because he wasn't authorized to publicly discuss the matter.
Regulators and exchanges have been poring over data from millions of trades trying to pinpoint what caused Thursday's massive, computerized sell-off, which at one point had the Dow Jones Industrial Average down by nearly 1,000 points. The Dow later recovered to close the session down 342 points.
The SEC is leading the investigation with the Commodity Futures Trading Commission. Those agencies are ultimately responsible for overseeing markets, but they rely heavily on exchanges to write and enforce their own rules. And the exchanges' rules vary widely, prompting top lawmakers to call for greater consistency.
Sen. Charles Schumer, a New York Democrat and member of the Senate Banking Committee, urged the exchanges to adopt systemwide circuit breakers.
"It appears that our fragmented market structure may very well have contributed to the difficulties we experienced last Thursday. Coordination and consistent safeguards between trading venues – and across markets – is essential," Schumer said in letters to Schapiro, CFTC Chairman Gary Gensler and the heads of all the major stocks and futures exchanges.
Schumer also asked the SEC to put in a new centralized market surveillance system to watch for risk and manipulation across all exchanges and trading platforms.
As regulators seek to understand the root cause of Thursday's dive, they again are relying on the exchanges – this time to flag suspicious trades and help the SEC narrow the focus of its probe.
One reason: Market-wide trading data is not collected in a single location. Instead, each exchange's trades are reported to its designated self-regulator – often part of the same company that owns the exchange.
Regulators now believe the disruption was caused by a toxic, not-yet-understood, feedback loop created when multiple trading schemes interacted, according to people familiar with the situation. That contradicts earlier speculation that the trigger was a small number of erroneous trades.
That means it could take weeks to sort out the problem, said the people, who spoke on condition of anonymity because they were not authorized to discuss the investigation.
High-frequency trading uses mathematical models and computers to buy and sell huge numbers of shares in milliseconds. It accounts for two-thirds of all stock trading in the U.S., and proponents say it makes the stock market run more smoothly by efficiently connecting buyers and sellers.
On Capitol Hill Tuesday, Rep. Paul Kanjorski, D-Pa., will hold a hearing into Thursday's market activity. Kanjorski's subcommittee – which is responsible for overseeing and crafting legislation on capital markets – hasn't held a hearing on flash trading to this point.
Schapiro and Gensler will appear together at the hearing, as will key executives from the NYSE, Nasdaq and Chicago-based CME Group Inc.
The Senate subcommittee that oversees financial markets is preparing to hold its own hearing on the matter in the coming weeks, said a spokesman for Chairman Sen. Jack Reed, D-R.I.
Stocks rocketed higher Monday after European leaders agreed to a nearly $1 trillion rescue plan to avoid a major debt crisis and the U.S. Federal Reserve said it would also provide loans overseas. The Dow Jones industrial average rose more than 340 points in afternoon trading.
___
Wagner reported from Washington. AP Business Writer Marcy Gordon and Associated Press Writer Jim Kuhnhenn contributed to this report.
SEC: Stock Exchanges Agree To Changes To Prevent Another Market ‘Glitch’ 10 May 2010 (The Huffington Post) http://tinyurl.com/32mmu4t
9 May 2010, (Acting Man)
http://www.acting-man.com/?p=627
A market ripe for a fall
Last Thursday the market experienced a sudden air pocket, with the S&P index temporarily dropping by over 100 points. In real-time, it certainly looked as if a crash were underway. At the low point, a record one day intra-day loss was recorded. As is now known, a mixture of errors and glitches contributed to the situation, and it is also known that several HFT (high frequency trading) firms simply stopped trading after the DJIA had fallen by 500 points. Apparently, some of these firms have a rule to withdraw when 'disorderly market conditions' pertain.
Let us be clear beforehand, the stock market was more than ripe for a sell-off. In the weeks leading up to the late April high numerous sentiment indicators went to rarely seen extremes. Especially equity option traders (both large and small) had begun to buy more and more call options for several weeks while refraining from buying protective puts, and various polls (such as Investor's Intelligence) showed an increase in bullish opinion on a par with the bullish consensus seen at major market tops in the past. Lastly, the mutual fund cash-to-assets ratio fell to a new all time low, clocking in at barely above 3% in March. This particular datum is in fact a major medium to long term bearish indicator, and a strong warning that the secular bear market is likely to continue and enter its next phase of liquidation.
The CBOE equity put-call ratio
The Investor's Intelligence poll – at the end of April, over 55% of advisors were bullish, and less than 20% bearish. This is a very extreme reading.
The mutual fund cash – to assets ratio – a new all time low of 3,4% as of March 2010.
This surfeit of bullish sentiment was certainly aligned with the trend, but that trend had become very stretched. The stock market has been strenuously overvalued for quite some time (more on the stock market valuation issue in a follow-up post). Insiders have been selling hand over fist since the summer of 2009, with nary any buying detectable. In short, the market was in a situation where a period of abrupt and large losses was likely to occur soon. In the trading week prior to the mini-crash, volatility suddenly picked up, a classic pattern of distribution.
The SPX prior to the mini-crash: A pattern of distribution.
Trading systems go haywire
As mentioned above, several HFT firms ceased trading during the market crash in medias res. As the Wall Street Journal reports:
number of high-frequency firms stopped trading Thursday in the midst of the market plunge, possibly adding to the market’s selloff. Tradebot Systems Inc., a large high-frequency firm based in Kansas City, Mo., closed down its computer trading systems when the Dow Jones Industrial Average had dropped about 500 points, said Dave Cummings, founder and chairman of the firm. Tradeworx Inc., a N.J. firm that operates a high-frequency fund, also stopped trading during the market turmoil, according to a person familiar with the firm. Mr. Cummings said Tradebot’s system is designed to stop trading when the market becomes too volatile, too fast. “That’s what we do for safety,” he said. “If the market’s weird, we don’t want to compound the problem.” Tradebot says it often accounts for about 5% of U.S. stock-market trading volume. The withdrawal of high-frequency firms from the market didn’t necessarily cause the downturn, but could have added to it, some market experts say. A number of high-frequency firms closing down in the midst of a sharp market drop can “widen markets out substantially,” said Jamie Selway, managing director of New York broker White Cap Trading.
An intra-day chart of the mini crash – each candle represents 3 minutes – the period when the bids were suddenly pulled is clearly discernible. Large
An intra-day chart of venerable Dow stock Procter & Gamble – n.b. this is considered a 'defensive stock' – another crash lasting 3 minutes and reversed just as quickly. Large
According to this Wikipedia article on quantitative trading strategies, HFT recently accounted for more than 70% of all trading volume on US stock exchanges. Does it matter when these firms stop trading and pull all their bids? You bet it does. In discussions with several friends in recent months, I have dubbed this phenomenon the 'fully automated crash' (FAC). My argument centered on several aspects of the market structure. For one thing, the claim made by HFT firms that they have effectively replaced the 'specialist system' and by providing liquidity have actually helped to keep the market stable, never sounded credible to me. These firms use algorithms for trading, designed to arbitrage away what are often tiny price differences. My question was always: What if all of these algorithms want to sell at once, with none of them bidding for shares? Is that an unthinkable situation?
We now know that it can indeed happen. In addition, there are other quantitative trading strategies employed by dedicated hedge funds in the market, most of which use some combination of technical analysis and empirical historical data to determine which trades to execute.
The most salient fact about these quant strategies is that none of them have anything to do with 'investing' in the classical sense of the term. While every system is slightly different from its peers, the main inputs of these systems still tend to increase the herding effect – this means that e.g. favored stocks or commodities will see their trends magnified, adding to the 'normal' herding effect observed in financial markets, and eventually exaggerating the overvaluation of these assets. The other side of the coin is that when a sudden market decline happens, all these systems will sell or attempt to short the market at once.
Once again, apart from systems that use mean reversion as their major input, this will lead to a 'bidless market' and exacerbate declines. The final point to consider are the option markets. Since the crash of 2008, overall trading volume in the stock market has steadily declined. At the same time however, open interest in the option markets has raced from record to record. The increases are by no means small, as you can see when looking at the press releases of the CBOE, the major options exchange in the US.
Consider now how option writers protect themselves against adverse market movements. The most prevalent strategy is referred to as 'dynamic delta hedging'. Delta in options terminology is also fittingly known as the 'hedge ratio' – it compares the price change in the underlying security to the corresponding price change in the derivative. The objective of dynamic delta hedging is to become 'delta neutral' if adverse price movements endanger the position of an option writer. In practice, these strategies are also executed by algorithms, whereby for instance the writer of a naked put will go increasingly short the underlying security if the security falls and threatens to slice through the strike price of the written put.
Conversely, the writer of a naked call will go increasingly long the underlying security if it rises and approaches and eventually breaches the strike price. These strategies are adapted to various parameters such as the premium received by the options writer, but essentially they all aim to offset risk by taking a position opposite to the options position – and they do it dynamically. Naturally, this form of dynamic hedging will then also magnify price movements, especially when these price movements are very large and many strike prices with large open interest are sliced through in a short period of time. Given that trading volume in equities has steadily trended down, while options open interest and trading volume has trended steadily higher, the potential for dynamic delta hedging to exacerbate both sudden and large up and down moves in the market has increased markedly.
Panic of the machines
Considering the prevalence of quantitative trading strategies in today's marketplace, human emotion, which has been the main driver of market movements in the past, has at least in part been superseded by the 'greed and fear of machines'. Naturally, the computers doing the trading do not have emotions – that is precisely the reason why quant strategies have become so popular in the first place. It is held that they remove the human error factor from securities trading, by maintaining cold, pre-programmed objectivity in all situations.
This conviction is a close cousin to the conviction back in the late 1980's that 'portfolio insurance' using S&P futures to protect a basket of stocks dynamically with a likewise fully computerized procedure, could in fact insure stock portfolios against losses. Instead the combination of portfolio insurance and program trading (a form of arbitrage between stock index futures and the underlying baskets of stocks) combined to produce the biggest one day market crash in history in 1987.
Any market in which a specific trader has 'become' an overwhelming percentage of the positions in this market is bound for problems. HFT and other quant strategies are a form of trading that effectively transforms the many different firms engaging in it into a single entity, due to the strong similarities in the strategies employed.
After all, the algorithms used by the black box community have been programmed by humans, all of whom work with the very same set of historical data to come up with effective trading rules that can be back-tested and thus legitimized. Instead of eliminating human error, the computerized strategies are in fact multiplying it, by dint of all of them reacting in virtually the same manner to a given set of inputs. And so the machines are perfectly capable of reciprocating the mindless greed and equally mindless panic that characterize the emotion-laden trading of mere humans, and in fact, it appears that they are capable of exaggerating both.
Conclusion
Without a doubt, quantitative strategies are here to stay. There is growing investor demand for funds employing systematic strategies, and the marketplace has reacted to this growing demand by supplying ever more sophisticated systems that are on the whole highly successful. The panic of last Thursday will likely lead to new regulations and restrictions aiming to blunt the impact these strategies have on the market, but it can be safely predicted that not a whole lot will change in principle – the exchanges would be up in arms if any putative restrictions to electronic trading strategies were deemed too onerous, as they create a good slice of the exchanges' income.
Given that a huge sub-industry has evolved in the hedge fund industry and the CTA (commodity trading advisors) space that revolves around systematic strategies, there are now sizable vested interests that would be threatened by such regulatory action. Besides, we have empirical proof galore that as soon as one potentially market-destabilizing practice is curtailed (such as the curbs on program trading introduced after the 1987 crash), other strategies with similar characteristics will soon take their place. In any case, the market demand for such strategies will only continue to prevail as long as these strategies work as advertised. To wit, portfolio insurance died a sudden and quiet death after the 1987 crash.
There was no need to curb it – the market itself curbed it, by proving spectacularly that it didn't work. So far, most quant strategies seem to work just fine, hence demand for them is bound to continue to be strong. However, investors and traders need to be aware of the potential impact these strategies can have on the market. We may well one day wake up to a market dislocation unlike any other witnessed in market history to date.
A final point I wish to make is that in Thursday's trading another lesson was taught yet again: in a panic situation, when trading volume explodes and prices fall at great speed, the infrastructure that is supposed to handle transactions is prone to failure. It suddenly takes ages to get confirmations of trading executions, and as the many in the meantime 'busted' trades reveal, posted bids and offers can fail to reflect reality. For instance, Accenture (AGN) and several other stocks and ETFs at one point traded at plainly absurd prices (AGN went from about $45 to 1 cent in the space of a few minutes).
In other words, if you are exposed to a lot of risk, don't fool yourself into thinking that if anything untoward happens, you will be able to 'get out in time'. As always, market liquidity disappears just when it is needed most, and the backbone of our famed electronic trading spaces is less resilient and reliable than is generally assumed.
charts by: stockcharts.com, schaeffersresearch.com, sentimentstrader.com
Dress rehearsal for the fully automated crash 9 May 2010 (Acting Man) http://www.acting-man.com/?p=627
."Dress rehearsal for the fully automated crash" Good Article
Think that this "Dress rehearsal for the fully automated crash" (Article Above) is a good article in the sense that it tries to understand what it means if 70% of the trading is done by computers on pre-programmed algorithms.
When taken into account that 70% is done by computers it is funny to hear Duncan Niederauer CEO of the NYSE say that: “WE INTERVENE HUMAN JUDGEMENT” cause which “human judgement” is he talking about when almost all is done by computers? http://forum.prisonplanet.com/index.php?topic=169995.msg1011046#msg1011046
An other question comes to mind is; How does the NYSE intervene this "human judgement"? Probably also by a computer program or as the Duncan calls it “Model”.
So what we have here is the situation that computers are trading which each other intervened by other computers when things go the wrong way. What this has to do with "human judgement" in the way the CEO of the NYSE probably means cause the only human judgement involved here is that of the Nerds who created this program algorithms!?
If I understand it well the SEC is missing the point here if it thinks it can fix thing by simply uniform the system of so-called “circuit breakers” cause that wasn’t the real problem.
See: SEC: Stock Exchanges Agree To Changes To Prevent Another Market ‘Glitch’ (The Huffington Post) http://www.huffingtonpost.com/2010/05/10/sec-stock-exchanges-agree_n_570483.html
The problem was that the programmed computers shut of after a certain point so that in fact there wasn’t a full market any more and that the few who where still there (computers or not) decided to sell on.
That’s also what Duncan said: “…,they think they are gonna get filled near the price and because of the other electronic markets are THINLY TRADE the next price maybe down 5, 10, 15 dollars and that ’s how THINGS trade.”
.FranSix: "Its a very old, basic computing problem":
http://improbable.com/2010/05/05/garbage-in-garbaged-out-presaged/
Garbage In / Garbaged Out presaged
The principle of “Garbage In / Garbage Out” dates (though not in those specific words) to the mid-1800s. Charles Babbage pioneered many aspects of programmable computing.
In his book Passages from the Life of a Philosopher (1864, Longman and Co.), Babbage said:
On two occasions I have been asked,—”Pray, Mr. Babbage, if you put into the machine wrong figures, will the right answers come out?”
… I am not able rightly to apprehend the kind of confusion of ideas that could provoke such a question.
.
Hedge Fund Live -Powered by TFG Trading Matrix - Live Reaction to the Market Crash of May 6, 2010
http://www.youtube.com/watch?v=VMThQuf7aqE
.http://www.youtube.com/watch?v=VMThQuf7aqE
High Frequency Terrorism: How the Big Banks and Federal Reserve Maintained Their Death Grip Over the United States
10 May 2010, by David DeGraw & Max Keiser (Amped Status)
http://ampedstatus.com/high-frequency-terrorism-how-the-big-banks-and-federal-reserve-maintained-their-death-grip-over-the-united-states
The following article is the third-part of a six-part report titled: “The Financial Oligarchy Reigns: Democracy’s Death Spiral From Greece to the United States.” full report is available here.
III: Financial Terrorism Operations: 9/29/08 & 5/6/10
In the aftermath of Goldman Sachs’ public flogging before the world in Congress, and while under investigation, on the very day that Congress was voting on the “break up the too big to fail banks” amendment and cutting behind the scenes deals to gut the audit of the Federal Reserve, the stock market had its greatest sudden drop in history, plummeting 700 points in ten minutes - shades of September 29, 2008 all over again.
If you recall, back in September ‘08, as Congress was voting down the first bailout, the big banks made the market plunge a record 778 points in one day, fear and panic then led Congress to pass the bailout. Trillions of our tax dollars, the money that we desperately need to keep our society functioning over the long run, then went out the window and into the pockets of the very people who caused the crash.
What happened on September 29, 2008 will go down in history as one of the greatest acts of terrorism ever.
9/29/08 proved that when you have so much power concentrated in the hands of a few, you can manipulate a computer algorithm and make the market and economy go which ever way you want it to go. So on 5/6/10, just as the power of the big banks was threatened again on the floor of the Senate and a deal on auditing the Federal Reserve was being negotiated, in came a sudden and unprecedented ten-minute 700 point market drop. A precision-guided High Frequency Trading (HFT) attack to show Congress who’s boss.
If you think the massive sudden drop happened because one lowly trader hit one wrong button, if you actually believe that the entire stock market can plunge because of one mistaken key stroke by a low level trader, you are stunningly naïve. I hate to burst your bubble, but this was a direct attack.
In a market where 70% of all trades are executed by computer algorithms via High Frequency Trading (HFT), Goldman Sachs has the power to make the market crash or rise at will. In fact, Goldman has a major Weapon of Mass Destruction in its Program Trading monopoly of the New York Stock Exchange, as Tyler Durden described on Zero Hedge:
“Goldman’s dominance of the NYSE’s Program Trading platform, where in addition to recent entrant GETCO, it has been to date an explicit monopolist of the so-called Supplementary Liquidity Provider program, a role which affords the company greater liquidity rebates for, well providing liquidity, and generating who knows what other possible front market-looking, flow-prop integration benefits. Yesterday [5/6/10], Goldman’s SLP function was non-existent. One wonders - was the Goldman SLP team in fact liquidity taking, or to put it bluntly, among the main reasons for the market collapse….
… here is the most recently disclosed NYSE program trading data….
What is notable here is that of the 1.4 billion in principal shares, or shares traded for the firm’s own account, Goldman was the top trader by a margin of over 100% compared to the second biggest program trader.
We have long claimed that Goldman is the de facto monopolist of the NYSE’s program trading platform. As such, it is certainly the case that Goldman was instrumental in either a) precipitating yesterday’s crash or b) not providing the critical liquidity which it is required to do, when the time came. There are no other options.”
For further investigation, I turned to Max Keiser, who has written and authored similar Program Trading and HFT computer algorithms. I asked him if he thought this was an attack, here is what he had to say:
“May 6th was an unequivocal act of domestic financial terrorism in America. A day that will live in infamy.
To scare the lawmakers, themselves large owners of the very banks and stocks that they are supposed to be regulating, a financial Weapon of Mass Destruction was put to their head and they acquiesced.
As the inventor of the continuous double-auction, market-making technology (VST tech. US pat. no. 5950176) that is referenced 132 times by program trading and HFT patents since 1996, I can tell you that Goldman, JP Morgan and the gang simply pulled the ‘buys’ from their computer trading programs and manufactured a crash. And when the coast was clear, and it was clear the politicians were not going to vote for anything that would break up the ‘too big to fail’ banks; all the ’sells’ were pulled from the computers and the market roared back.
This is a Manchurian Candidate market where program trading bots start the ball rolling in whatever direction Wall St. wants the market to go - and then hundreds of thousands of day-traders watching Cramer on CNBC jump on the momentum bandwagon and commit the crime for the Wall St. financial terrorists, who then say, ‘It wasn’t us, it was ‘the market!’”
On Friday, the next day, after the “break up the too big to fail banks” amendment was soundly defeated by a 61 to 33 margin in Senate and a deal was struck to eliminate key provisions from the audit of the Federal Reserve bill, Goldman was meeting with the SEC to work out a settlement in their case against them. Once again, Goldman proves that crime pays. Welcome to the New Mafia World Order.
Other than the two major operations carried out on 9/29/08 and 5/6/10, we must also recall a smaller attack on January 21st and 22nd of 2010, when Obama had a press conference and came out in favor of the Volcker Rule, which would have limited these HFT and “proprietary trading” schemes. At that time, the market dropped 430 points. Soon after this attack, all follow up talk on the Volcker Rule faded away and this reform has not been seriously addressed by Obama since then.
The bottom line, the United States has been taken over by a financial terrorism network. Let’s face it, we are all hostages of these financial terrorists and our puppet politicians rather be in on the scam than defend our interests. If these terrorists don’t get their way at all times, they have the power to throw their tremendous weight around and turn millions of lives upside down in a matter of minutes, and as they have shown they have no hesitation in executing that power, no matter how many millions of lives they destroy.
They set off this crisis with a wave of bombings in their initial Economic Shock and Awe campaign two years ago, resulting in massive devastation. Just to name a few of their greatest hits within the U.S.:
* 50 million Americans are now living in poverty, which is the highest poverty rate in the industrialized world;
* 30 million Americans are in need of work;
* Five million American families foreclosed upon, 15 million expected by 2014;
* 50% of US children will now use a food stamp during childhood;
* Soaring budget deficits in states across the country and a record high national debt, with austerity measures on the way;
* Record-breaking profits and bonuses for themselves.
Like other terrorists, they don’t use IEDs, they use CDOs. They don’t use precision laser-guided missiles, they use High Frequency Trading. They don’t have WMDs, they have derivatives. Let’s also not forget that they have toxic assets and dirty debt bombs just waiting to be deployed upon the American public once there is any true growth in the economy. Their nuclear arsenal includes hundreds of Trillions in secretive derivatives and hidden debt bombs, just ticking away, waiting to be set off… at their whim…
Related Posts:
The Financial Oligarchy Reigns: Democracy’s Death Spiral From Greece to the United States: http://ampedstatus.com/the-financial-oligarchy-reigns-democracys-death-spiral-from-greece-to-the-united-states
Bailout Player BlackRock Becomes Bigger Than Federal Reserve: http://ampedstatus.com/bailout-player-blackrock-becomes-bigger-than-federal-reserve
Priceless: How The Federal Reserve Bought The Economics Profession: http://ampedstatus.com/priceless-how-the-federal-reserve-bought-the-economics-profession
Time to Audit the Federal Reserve: http://ampedstatus.com/time-to-audit-the-federal-reserve
Part IV: The Financial Coup d’Etat — The Economic Elite Vs. The People of the United States of America: http://ampedstatus.com/part-iv-the-financial-coup-detat-the-economic-elite-vs-the-people-of-the-united-states-of-america
High Frequency Terrorism: How the Big Banks and FED Maintained Their Death Grip Over the US 10 May 2010 (Amped Status) http://tinyurl.com/29ktgem
.10 May 2010, by David DeGraw & Max Keiser (Amped Status)
http://ampedstatus.com/high-frequency-terrorism-how-the-big-banks-and-federal-reserve-maintained-their-death-grip-over-the-united-states
The following article is the third-part of a six-part report titled: “The Financial Oligarchy Reigns: Democracy’s Death Spiral From Greece to the United States.” full report is available here.
III: Financial Terrorism Operations: 9/29/08 & 5/6/10
In the aftermath of Goldman Sachs’ public flogging before the world in Congress, and while under investigation, on the very day that Congress was voting on the “break up the too big to fail banks” amendment and cutting behind the scenes deals to gut the audit of the Federal Reserve, the stock market had its greatest sudden drop in history, plummeting 700 points in ten minutes - shades of September 29, 2008 all over again.
If you recall, back in September ‘08, as Congress was voting down the first bailout, the big banks made the market plunge a record 778 points in one day, fear and panic then led Congress to pass the bailout. Trillions of our tax dollars, the money that we desperately need to keep our society functioning over the long run, then went out the window and into the pockets of the very people who caused the crash.
What happened on September 29, 2008 will go down in history as one of the greatest acts of terrorism ever.
9/29/08 proved that when you have so much power concentrated in the hands of a few, you can manipulate a computer algorithm and make the market and economy go which ever way you want it to go. So on 5/6/10, just as the power of the big banks was threatened again on the floor of the Senate and a deal on auditing the Federal Reserve was being negotiated, in came a sudden and unprecedented ten-minute 700 point market drop. A precision-guided High Frequency Trading (HFT) attack to show Congress who’s boss.
If you think the massive sudden drop happened because one lowly trader hit one wrong button, if you actually believe that the entire stock market can plunge because of one mistaken key stroke by a low level trader, you are stunningly naïve. I hate to burst your bubble, but this was a direct attack.
In a market where 70% of all trades are executed by computer algorithms via High Frequency Trading (HFT), Goldman Sachs has the power to make the market crash or rise at will. In fact, Goldman has a major Weapon of Mass Destruction in its Program Trading monopoly of the New York Stock Exchange, as Tyler Durden described on Zero Hedge:
“Goldman’s dominance of the NYSE’s Program Trading platform, where in addition to recent entrant GETCO, it has been to date an explicit monopolist of the so-called Supplementary Liquidity Provider program, a role which affords the company greater liquidity rebates for, well providing liquidity, and generating who knows what other possible front market-looking, flow-prop integration benefits. Yesterday [5/6/10], Goldman’s SLP function was non-existent. One wonders - was the Goldman SLP team in fact liquidity taking, or to put it bluntly, among the main reasons for the market collapse….
… here is the most recently disclosed NYSE program trading data….
What is notable here is that of the 1.4 billion in principal shares, or shares traded for the firm’s own account, Goldman was the top trader by a margin of over 100% compared to the second biggest program trader.
We have long claimed that Goldman is the de facto monopolist of the NYSE’s program trading platform. As such, it is certainly the case that Goldman was instrumental in either a) precipitating yesterday’s crash or b) not providing the critical liquidity which it is required to do, when the time came. There are no other options.”
For further investigation, I turned to Max Keiser, who has written and authored similar Program Trading and HFT computer algorithms. I asked him if he thought this was an attack, here is what he had to say:
“May 6th was an unequivocal act of domestic financial terrorism in America. A day that will live in infamy.
To scare the lawmakers, themselves large owners of the very banks and stocks that they are supposed to be regulating, a financial Weapon of Mass Destruction was put to their head and they acquiesced.
As the inventor of the continuous double-auction, market-making technology (VST tech. US pat. no. 5950176) that is referenced 132 times by program trading and HFT patents since 1996, I can tell you that Goldman, JP Morgan and the gang simply pulled the ‘buys’ from their computer trading programs and manufactured a crash. And when the coast was clear, and it was clear the politicians were not going to vote for anything that would break up the ‘too big to fail’ banks; all the ’sells’ were pulled from the computers and the market roared back.
This is a Manchurian Candidate market where program trading bots start the ball rolling in whatever direction Wall St. wants the market to go - and then hundreds of thousands of day-traders watching Cramer on CNBC jump on the momentum bandwagon and commit the crime for the Wall St. financial terrorists, who then say, ‘It wasn’t us, it was ‘the market!’”
On Friday, the next day, after the “break up the too big to fail banks” amendment was soundly defeated by a 61 to 33 margin in Senate and a deal was struck to eliminate key provisions from the audit of the Federal Reserve bill, Goldman was meeting with the SEC to work out a settlement in their case against them. Once again, Goldman proves that crime pays. Welcome to the New Mafia World Order.
Other than the two major operations carried out on 9/29/08 and 5/6/10, we must also recall a smaller attack on January 21st and 22nd of 2010, when Obama had a press conference and came out in favor of the Volcker Rule, which would have limited these HFT and “proprietary trading” schemes. At that time, the market dropped 430 points. Soon after this attack, all follow up talk on the Volcker Rule faded away and this reform has not been seriously addressed by Obama since then.
The bottom line, the United States has been taken over by a financial terrorism network. Let’s face it, we are all hostages of these financial terrorists and our puppet politicians rather be in on the scam than defend our interests. If these terrorists don’t get their way at all times, they have the power to throw their tremendous weight around and turn millions of lives upside down in a matter of minutes, and as they have shown they have no hesitation in executing that power, no matter how many millions of lives they destroy.
They set off this crisis with a wave of bombings in their initial Economic Shock and Awe campaign two years ago, resulting in massive devastation. Just to name a few of their greatest hits within the U.S.:
* 50 million Americans are now living in poverty, which is the highest poverty rate in the industrialized world;
* 30 million Americans are in need of work;
* Five million American families foreclosed upon, 15 million expected by 2014;
* 50% of US children will now use a food stamp during childhood;
* Soaring budget deficits in states across the country and a record high national debt, with austerity measures on the way;
* Record-breaking profits and bonuses for themselves.
Like other terrorists, they don’t use IEDs, they use CDOs. They don’t use precision laser-guided missiles, they use High Frequency Trading. They don’t have WMDs, they have derivatives. Let’s also not forget that they have toxic assets and dirty debt bombs just waiting to be deployed upon the American public once there is any true growth in the economy. Their nuclear arsenal includes hundreds of Trillions in secretive derivatives and hidden debt bombs, just ticking away, waiting to be set off… at their whim…
Related Posts:
The Financial Oligarchy Reigns: Democracy’s Death Spiral From Greece to the United States: http://ampedstatus.com/the-financial-oligarchy-reigns-democracys-death-spiral-from-greece-to-the-united-states
Bailout Player BlackRock Becomes Bigger Than Federal Reserve: http://ampedstatus.com/bailout-player-blackrock-becomes-bigger-than-federal-reserve
Priceless: How The Federal Reserve Bought The Economics Profession: http://ampedstatus.com/priceless-how-the-federal-reserve-bought-the-economics-profession
Time to Audit the Federal Reserve: http://ampedstatus.com/time-to-audit-the-federal-reserve
Part IV: The Financial Coup d’Etat — The Economic Elite Vs. The People of the United States of America: http://ampedstatus.com/part-iv-the-financial-coup-detat-the-economic-elite-vs-the-people-of-the-united-states-of-america
High Frequency Terrorism: How the Big Banks and FED Maintained Their Death Grip Over the US 10 May 2010 (Amped Status) http://tinyurl.com/29ktgem
Did a Big Bet Help Trigger 'Black Swan' Stock Swoon?
10 May 2010, by Scott Patterson and Tom Lauricella (The Wall Street Journal)
http://online.wsj.com/article/SB10001424052748704879704575236771699461084.html?mod=WSJ_World_LeadStory
Shortly after 2:15 p.m. Eastern time on Thursday, hedge fund Universa Investments LP placed a big bet in the Chicago options trading pits that stocks would continue their sharp declines.
On any other day, this $7.5 million trade for 50,000 options contracts might have briefly hurt stock prices, though not caused much of a ripple. But coming on a day when all varieties of financial markets were deeply unsettled, the trade may have played a key role in the stock-market collapse just 20 minutes later.
The trade by Universa, a hedge fund advised by Nassim Taleb, author of "Black Swan: The Impact of the Highly Improbable," led traders on the other side of the transaction—including Barclays Capital, the brokerage arm of British bank Barclays PLC—to do their own selling to offset some of the risk, according to traders in Chicago.
Then, as the market fell, those declines are likely to have forced even more "hedging" sales, creating a tsunami of pressure that spread to nearly all parts of the market.
The tidal wave of selling fed into a market already on edge about the economy in Europe. As the selling spread, a blast of orders appears to have jarred the flow of data going into brokerage firms, such as Barclays Capital, according to people familiar with the matter.
Exchanges, in turn, were clogged by huge volumes of offers to buy and sell stocks, say traders and exchange executives. Even before some individual stocks collapsed to just a penny a share, data from the NYSE Euronext's electronic Arca exchange started to appear questionable, say traders.
In the disarray, some huge superfast-trading hedge funds that now provide much of the liquidity for the stock market pulled to the sidelines. The working theory among traders and others involved in the exchange meltdown is that the "Black Swan"-linked fund may have contributed to a "Black Swan" moment, a rare, unforeseen event that can have devastating consequences.
"Universa alone couldn't have caused the meltdown," said Mark Spitznagel, Universa's founder. "We had reached a critical point in the market, and it was poised to collapse." Barclays Capital declined to comment.
As more details of Thursday's collapse become clear, there is less evidence to suggest a "fat finger" data-entry error caused the collapse. Instead, the picture is one of a rare confluence of events, some linked, some unrelated, that exposed weaknesses in the stock market large and small. Within five minutes, the Dow Jones Industrial Average had lost 700 points as trading seized up in individual stocks such as Procter & Gamble and even exchange-traded mutual funds.
"It did point out that there is a structural flaw," said Gus Sauter, chief investment officer at Vanguard Group. "We have to think through how you preserve the immediacy and yet preserve the liquidity."
The episode highlights a bigger question about the stock market. In recent years, the market has grown exponentially faster and more diverse. Stock trading's main venue is no longer the New York Stock Exchange but rather computer servers run by companies as far afield as Austin, Texas; Kansas City, Mo.; and Red Bank, N.J.
This diversity has made stock-trading cheaper, a plus for both institutional and individual investors. It has also made it more unruly and difficult to ensure an orderly market. Today that responsibility falls largely on a group of high-frequency traders who make up an estimated two-thirds of stock-market volume. These for-profit hedge funds look out for their own investors' interests and not those of investors in the stocks they trade.
Hours before the panic began, there were signs that Thursday wasn't shaping up to be a humdrum day. By 11 a.m., when the Dow was down only about 60 points, selling volume was unusually heavy. One measure of selling—the percentage of stocks falling without first moving upward—was at its highest since the day the market reopened after the Sept. 11 terror attacks, according to Barclays.
By 2 p.m., financial markets of just about every sort were under significant strain. In Europe, the spillover from the Greek debt crisis led to a huge drop in the euro against the dollar and the Japanese yen, as well as a broad bond-market decline. European banks were charging each other higher interest rates to borrow money.
Some 2,800 miles away from Wall Street, in Santa Monica, Calif., Universa placed its trade.
The trade wasn't out of character for Universa, which has about $6 billion under management. Mr. Taleb, who is an adviser to the firm and an investor, gained fame for "The Black Swan," a book that suggested unlikely events in the financial markets are far more likely than most investors believe.
Universa frequently purchases options contracts that will pay off if the market makes a sharp move lower. It posted big gains in the market selloff of late 2008 and launched a fund last year designed to benefit if inflation surges.
Through the trading desks at Barclays, Universa bought 50,000 options contracts, according to people familiar with the matter. The contracts would pay off about $4 billion should the Standard & Poor's 500-stock index fall to 800 in June. It was at 1145 points at the time of the trade.
Back across the country in Chicago, the big trade appeared to have had an immediate ripple in the markets. The traders on the other side of the Universa trade were essentially betting stocks wouldn't post big losses.
But to minimize the risk of losing money, they in turn needed to sell, according to traders.
The more the market fell, the more the traders at places like Barclays had to sell to protect their own positions. This, along with likely dozens of other trades across the market, led to a cascade of selling in the futures markets.
As the stock-trading volume soared, data systems across the stock market began to get clogged. At Barclays Capital, a market data feed that delivers to the firm data on "buy" and "sell" orders went down, although a backup system immediately went online without any impact to the firm.
As the turmoil unfolded, every second saw some 300,000 pieces of stock information—stock prices moves, trades—pour into Barclays's system. A normal peak is some 60,000 ticks a second, says Barclays Capital's head of electronic trading sales, Brian Fagen, who was monitoring the chaos in the market on his screens.
Large hedge funds were juggling huge positions as volume spiked. Two Sigma Investments LLC, a New York hedge-fund manager that engages in complex trading strategies, saw its highest-volume day since launching in 2001, according to a person familiar with the matter.
By 2:37 p.m., the overload seemed to have taken its toll on the NYSE's Arca electronic-trading system. At that point, its rival, the Nasdaq, owned by Nasdaq OMX Group Inc., detected what it felt was questionable information in the data. It sent out a message saying it would no longer route quotes to Arca.
This step, known as declaring "self help," doesn't happen often among the major exchanges. But in the coming minutes, the BATS exchange also stopped automatically routing orders to Arca.
For a crucial set of players—high-frequency-trading hedge funds—all this turmoil was becoming too risky to handle. One fear that would prove all too real was that in the extreme swings, some, but not all, trades would later be canceled, leaving them on the hook for unwanted positions.
Manoj Narang, whose Tradeworx Inc. firm runs a high-frequency trading operation in Red Bank, N.J., began to worry the extreme volatility could lead to painful losses in his fund.
At about 2:40, he and a small team of traders scrambled to close the positions held by the high-speed fund, which trades rapidly between stock indexes and the individual stocks in the index.
Normally, it takes about a fraction of a second to unwind the trades because of the high-powered computers Mr. Narang uses. But as the market plunged, it took about two minutes—an eternity in today's computer-driven market. Tradebot Systems Inc, a large high-frequency firm based in Kansas City, Mo., was also seeing chaotic action in many of the securities it traded and decided to pull back from the market.
With the high-frequency funds either selling or pulling out of the market, Wall Street brokerage firms pulling back and the NYSE temporarily halting trading on some stocks, offers to buy stocks vanished from underneath the market. Normally there can be hundreds of offers to buy the iShares Russell 1000 Growth Index exchange-traded fund, but at 2:46 p.m., there were just four bids north of $14 for a fund that had been trading at $51 minutes earlier, according to data reviewed by The Wall Street Journal.
Around 3 p.m., the selling pressure abated. Just as swiftly as the market fell, it recovered ground. One factor behind the swift recovery, traders say, were funds that use computers and formulas to sniff out bargains in the market. These funds swooped in on hundreds of cheap stocks, helping push the market higher.
—Jacob Bunge contributed to this article. - Write to Scott Patterson at scott.patterson@wsj.com and Tom Lauricella at tom.lauricella@wsj.com
Did a Big Bet Help Trigger 'Black Swan' Stock Swoon? 10 May 2010 (The Wall Street Journal) http://tinyurl.com/23yr924
.10 May 2010, by Scott Patterson and Tom Lauricella (The Wall Street Journal)
http://online.wsj.com/article/SB10001424052748704879704575236771699461084.html?mod=WSJ_World_LeadStory
Shortly after 2:15 p.m. Eastern time on Thursday, hedge fund Universa Investments LP placed a big bet in the Chicago options trading pits that stocks would continue their sharp declines.
On any other day, this $7.5 million trade for 50,000 options contracts might have briefly hurt stock prices, though not caused much of a ripple. But coming on a day when all varieties of financial markets were deeply unsettled, the trade may have played a key role in the stock-market collapse just 20 minutes later.
The trade by Universa, a hedge fund advised by Nassim Taleb, author of "Black Swan: The Impact of the Highly Improbable," led traders on the other side of the transaction—including Barclays Capital, the brokerage arm of British bank Barclays PLC—to do their own selling to offset some of the risk, according to traders in Chicago.
Then, as the market fell, those declines are likely to have forced even more "hedging" sales, creating a tsunami of pressure that spread to nearly all parts of the market.
The tidal wave of selling fed into a market already on edge about the economy in Europe. As the selling spread, a blast of orders appears to have jarred the flow of data going into brokerage firms, such as Barclays Capital, according to people familiar with the matter.
Exchanges, in turn, were clogged by huge volumes of offers to buy and sell stocks, say traders and exchange executives. Even before some individual stocks collapsed to just a penny a share, data from the NYSE Euronext's electronic Arca exchange started to appear questionable, say traders.
In the disarray, some huge superfast-trading hedge funds that now provide much of the liquidity for the stock market pulled to the sidelines. The working theory among traders and others involved in the exchange meltdown is that the "Black Swan"-linked fund may have contributed to a "Black Swan" moment, a rare, unforeseen event that can have devastating consequences.
"Universa alone couldn't have caused the meltdown," said Mark Spitznagel, Universa's founder. "We had reached a critical point in the market, and it was poised to collapse." Barclays Capital declined to comment.
As more details of Thursday's collapse become clear, there is less evidence to suggest a "fat finger" data-entry error caused the collapse. Instead, the picture is one of a rare confluence of events, some linked, some unrelated, that exposed weaknesses in the stock market large and small. Within five minutes, the Dow Jones Industrial Average had lost 700 points as trading seized up in individual stocks such as Procter & Gamble and even exchange-traded mutual funds.
"It did point out that there is a structural flaw," said Gus Sauter, chief investment officer at Vanguard Group. "We have to think through how you preserve the immediacy and yet preserve the liquidity."
The episode highlights a bigger question about the stock market. In recent years, the market has grown exponentially faster and more diverse. Stock trading's main venue is no longer the New York Stock Exchange but rather computer servers run by companies as far afield as Austin, Texas; Kansas City, Mo.; and Red Bank, N.J.
This diversity has made stock-trading cheaper, a plus for both institutional and individual investors. It has also made it more unruly and difficult to ensure an orderly market. Today that responsibility falls largely on a group of high-frequency traders who make up an estimated two-thirds of stock-market volume. These for-profit hedge funds look out for their own investors' interests and not those of investors in the stocks they trade.
Hours before the panic began, there were signs that Thursday wasn't shaping up to be a humdrum day. By 11 a.m., when the Dow was down only about 60 points, selling volume was unusually heavy. One measure of selling—the percentage of stocks falling without first moving upward—was at its highest since the day the market reopened after the Sept. 11 terror attacks, according to Barclays.
By 2 p.m., financial markets of just about every sort were under significant strain. In Europe, the spillover from the Greek debt crisis led to a huge drop in the euro against the dollar and the Japanese yen, as well as a broad bond-market decline. European banks were charging each other higher interest rates to borrow money.
Some 2,800 miles away from Wall Street, in Santa Monica, Calif., Universa placed its trade.
The trade wasn't out of character for Universa, which has about $6 billion under management. Mr. Taleb, who is an adviser to the firm and an investor, gained fame for "The Black Swan," a book that suggested unlikely events in the financial markets are far more likely than most investors believe.
Universa frequently purchases options contracts that will pay off if the market makes a sharp move lower. It posted big gains in the market selloff of late 2008 and launched a fund last year designed to benefit if inflation surges.
Through the trading desks at Barclays, Universa bought 50,000 options contracts, according to people familiar with the matter. The contracts would pay off about $4 billion should the Standard & Poor's 500-stock index fall to 800 in June. It was at 1145 points at the time of the trade.
Back across the country in Chicago, the big trade appeared to have had an immediate ripple in the markets. The traders on the other side of the Universa trade were essentially betting stocks wouldn't post big losses.
But to minimize the risk of losing money, they in turn needed to sell, according to traders.
The more the market fell, the more the traders at places like Barclays had to sell to protect their own positions. This, along with likely dozens of other trades across the market, led to a cascade of selling in the futures markets.
As the stock-trading volume soared, data systems across the stock market began to get clogged. At Barclays Capital, a market data feed that delivers to the firm data on "buy" and "sell" orders went down, although a backup system immediately went online without any impact to the firm.
As the turmoil unfolded, every second saw some 300,000 pieces of stock information—stock prices moves, trades—pour into Barclays's system. A normal peak is some 60,000 ticks a second, says Barclays Capital's head of electronic trading sales, Brian Fagen, who was monitoring the chaos in the market on his screens.
Large hedge funds were juggling huge positions as volume spiked. Two Sigma Investments LLC, a New York hedge-fund manager that engages in complex trading strategies, saw its highest-volume day since launching in 2001, according to a person familiar with the matter.
By 2:37 p.m., the overload seemed to have taken its toll on the NYSE's Arca electronic-trading system. At that point, its rival, the Nasdaq, owned by Nasdaq OMX Group Inc., detected what it felt was questionable information in the data. It sent out a message saying it would no longer route quotes to Arca.
This step, known as declaring "self help," doesn't happen often among the major exchanges. But in the coming minutes, the BATS exchange also stopped automatically routing orders to Arca.
For a crucial set of players—high-frequency-trading hedge funds—all this turmoil was becoming too risky to handle. One fear that would prove all too real was that in the extreme swings, some, but not all, trades would later be canceled, leaving them on the hook for unwanted positions.
Manoj Narang, whose Tradeworx Inc. firm runs a high-frequency trading operation in Red Bank, N.J., began to worry the extreme volatility could lead to painful losses in his fund.
At about 2:40, he and a small team of traders scrambled to close the positions held by the high-speed fund, which trades rapidly between stock indexes and the individual stocks in the index.
Normally, it takes about a fraction of a second to unwind the trades because of the high-powered computers Mr. Narang uses. But as the market plunged, it took about two minutes—an eternity in today's computer-driven market. Tradebot Systems Inc, a large high-frequency firm based in Kansas City, Mo., was also seeing chaotic action in many of the securities it traded and decided to pull back from the market.
With the high-frequency funds either selling or pulling out of the market, Wall Street brokerage firms pulling back and the NYSE temporarily halting trading on some stocks, offers to buy stocks vanished from underneath the market. Normally there can be hundreds of offers to buy the iShares Russell 1000 Growth Index exchange-traded fund, but at 2:46 p.m., there were just four bids north of $14 for a fund that had been trading at $51 minutes earlier, according to data reviewed by The Wall Street Journal.
Around 3 p.m., the selling pressure abated. Just as swiftly as the market fell, it recovered ground. One factor behind the swift recovery, traders say, were funds that use computers and formulas to sniff out bargains in the market. These funds swooped in on hundreds of cheap stocks, helping push the market higher.
—Jacob Bunge contributed to this article. - Write to Scott Patterson at scott.patterson@wsj.com and Tom Lauricella at tom.lauricella@wsj.com
Did a Big Bet Help Trigger 'Black Swan' Stock Swoon? 10 May 2010 (The Wall Street Journal) http://tinyurl.com/23yr924
Hedge Fund Role Eyed In Thursday’s Market Meltdown
11 May 2010, (Fin Alternatives)
http://www.finalternatives.com/node/12451
Were hedge funds responsible for Thursday’s market madness after all?
According to The Wall Street Journal, an otherwise-innocuous $7.5 million options trade by hedge fund Universa Investments may have triggered the tumultuous 20 minutes period in which the Dow Jones Industrial Average plunged nearly 1,000 points, only to quickly rebound.
While a trade for 50,000 options contracts on the Chicago markets is not uncommon, coming on top of worldwide market uncertainties and continuing concerns about the European debt crisis, it may have unleashed a tidal wave that briefly swamped the markets.
Universa, the $6 billion Santa Monica, Calif., hedge fund best known for its relationship with economist and “Black Swan” theorist Nicholas Nassim Taleb, placed its trade at 2:15 p.m. Eastern time through Barclays Capital. The move caused Universa’s counterparties, among them Barclays itself, to sell some shares to offset the risk of the hedge fund trade, according to the Journal.
With the market falling anyway, those sales are likely to have increased, causing high-frequency trading hedge funds to step aside, as the huge volumes slow transactions. But those hedge funds are critical to market liquidity, according to the Journal, and their inaction only led to further trouble.
The volume was some of the highest hedge fund had ever seen. Two Sigma Investments said Thursday was its busiest day, in terms of volume, ever, the Journal reports.
Most hedge fund emerged from Thursday’s mayhem relatively unscathed. One London hedge fund manager told Reuters, “From what I’ve seen so far, most guys were OK—they lost 1% or made 1%.” Some, however, did substantially better.
Moore Capital Management’s Greg Coffey turned a tidy 1.5% profit last week thanks in part to Thursday’s volatility, according to Reuters. HSBC Alternative Investments’ Tim Gascoigne cited a “long volatility” hedge fund that enjoyed a 10% return last week, while another fund boasted of a 4% return on Thursday alone.
Still, most hedge funds seemed to steer clear of the carnage between 2:40 p.m. and 3 p.m.
“It’s not our style to do something in such high volatility,” another hedge fund manager told Reuters. “Hedge fund managers will not necessarily want to get involved if they don’t know why it happened.”
Another, Martin Currie’s Tom Walker, told the news agency, “I don’t know who managed to buy Procter & Gamble 37% down… but we didn't.”
Meanwhile, the heads of the major U.S. exchanges met yesterday with Securities and Exchange Commission Chairman Mary Schapiro to make sure it doesn’t happen again. The big markets are working on new circuit-breaker thresholds that will determine when trading will be summarily stopped. A lack of synchronization between the major exchanges and electronic exchanges has been suggested as one of the causes of Thursday’s problems.
Bats Global Markets, CBOE Holdings, Direct Edge Holdings, International Securities Exchange Holdings, Nasdaq OMX Group and NYSE Euronext are to submit their plans to regulators this week.
Hedge Fund Role Eyed In Thursday’s Market Meltdown 11 May 2010 (Fin Alternatives) http://tinyurl.com/38p5jxk
.11 May 2010, (Fin Alternatives)
http://www.finalternatives.com/node/12451
Were hedge funds responsible for Thursday’s market madness after all?
According to The Wall Street Journal, an otherwise-innocuous $7.5 million options trade by hedge fund Universa Investments may have triggered the tumultuous 20 minutes period in which the Dow Jones Industrial Average plunged nearly 1,000 points, only to quickly rebound.
While a trade for 50,000 options contracts on the Chicago markets is not uncommon, coming on top of worldwide market uncertainties and continuing concerns about the European debt crisis, it may have unleashed a tidal wave that briefly swamped the markets.
Universa, the $6 billion Santa Monica, Calif., hedge fund best known for its relationship with economist and “Black Swan” theorist Nicholas Nassim Taleb, placed its trade at 2:15 p.m. Eastern time through Barclays Capital. The move caused Universa’s counterparties, among them Barclays itself, to sell some shares to offset the risk of the hedge fund trade, according to the Journal.
With the market falling anyway, those sales are likely to have increased, causing high-frequency trading hedge funds to step aside, as the huge volumes slow transactions. But those hedge funds are critical to market liquidity, according to the Journal, and their inaction only led to further trouble.
The volume was some of the highest hedge fund had ever seen. Two Sigma Investments said Thursday was its busiest day, in terms of volume, ever, the Journal reports.
Most hedge fund emerged from Thursday’s mayhem relatively unscathed. One London hedge fund manager told Reuters, “From what I’ve seen so far, most guys were OK—they lost 1% or made 1%.” Some, however, did substantially better.
Moore Capital Management’s Greg Coffey turned a tidy 1.5% profit last week thanks in part to Thursday’s volatility, according to Reuters. HSBC Alternative Investments’ Tim Gascoigne cited a “long volatility” hedge fund that enjoyed a 10% return last week, while another fund boasted of a 4% return on Thursday alone.
Still, most hedge funds seemed to steer clear of the carnage between 2:40 p.m. and 3 p.m.
“It’s not our style to do something in such high volatility,” another hedge fund manager told Reuters. “Hedge fund managers will not necessarily want to get involved if they don’t know why it happened.”
Another, Martin Currie’s Tom Walker, told the news agency, “I don’t know who managed to buy Procter & Gamble 37% down… but we didn't.”
Meanwhile, the heads of the major U.S. exchanges met yesterday with Securities and Exchange Commission Chairman Mary Schapiro to make sure it doesn’t happen again. The big markets are working on new circuit-breaker thresholds that will determine when trading will be summarily stopped. A lack of synchronization between the major exchanges and electronic exchanges has been suggested as one of the causes of Thursday’s problems.
Bats Global Markets, CBOE Holdings, Direct Edge Holdings, International Securities Exchange Holdings, Nasdaq OMX Group and NYSE Euronext are to submit their plans to regulators this week.
Hedge Fund Role Eyed In Thursday’s Market Meltdown 11 May 2010 (Fin Alternatives) http://tinyurl.com/38p5jxk
Webster Tarpley on the Crash
The Alex Jones Show Tue 05.11.2010 (TV) part-17
http://www.youtube.com/watch?v=ImJTud7oTQ4
The Alex Jones Show Tue 05.11.2010 (TV) part-18
http://www.youtube.com/watch?v=izbpViSFvdc
The Alex Jones Show Tue 05.11.2010 (TV) part-16
http://www.youtube.com/watch?v=uixtjMQ7M4E
The Alex Jones Show Tue 05.11.2010 (TV) part-17
http://www.youtube.com/watch?v=ImJTud7oTQ4
The Alex Jones Show Tue 05.11.2010 (TV) part-18
http://www.youtube.com/watch?v=izbpViSFvdc
The Alex Jones Show Tue 05.11.2010 (TV) part-19
http://www.youtube.com/watch?v=GOYSyCqvCZ8
The Alex Jones Show Tue 05.11.2010 (TV) part-20
http://www.youtube.com/watch?v=YT0a2uIB6LU
The Alex Jones Show Tue 05.11.2010 (TV) part-21
http://www.youtube.com/watch?v=ymWqggzge7o
The Alex Jones Show Tue 05.11.2010 (TV) part-22 Final
http://www.youtube.com/watch?v=yiUP_P-2j9U
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The Alex Jones Show Tue 05.11.2010 (TV) part-17
http://www.youtube.com/watch?v=ImJTud7oTQ4
The Alex Jones Show Tue 05.11.2010 (TV) part-18
http://www.youtube.com/watch?v=izbpViSFvdc
The Alex Jones Show Tue 05.11.2010 (TV) part-16
http://www.youtube.com/watch?v=uixtjMQ7M4E
The Alex Jones Show Tue 05.11.2010 (TV) part-17
http://www.youtube.com/watch?v=ImJTud7oTQ4
The Alex Jones Show Tue 05.11.2010 (TV) part-18
http://www.youtube.com/watch?v=izbpViSFvdc
The Alex Jones Show Tue 05.11.2010 (TV) part-19
http://www.youtube.com/watch?v=GOYSyCqvCZ8
The Alex Jones Show Tue 05.11.2010 (TV) part-20
http://www.youtube.com/watch?v=YT0a2uIB6LU
The Alex Jones Show Tue 05.11.2010 (TV) part-21
http://www.youtube.com/watch?v=ymWqggzge7o
The Alex Jones Show Tue 05.11.2010 (TV) part-22 Final
http://www.youtube.com/watch?v=yiUP_P-2j9U
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