Thursday, May 6, 2010

Mr. President: Unplug the F*ing Computers

Ticker Guy link

VOLUME is not liquidity. If I pass the same 100 shares back and forth 10,000 times there is one million shares on the tape (volume) but liquidity is ONE HUNDRED SHARES!

Try to sell 10,000 and POOF - it trades for a PENNY!

P&G was the trigger - we have had a market with NO REAL LIQUIDITY for over a year now, with it all bull**** and games with HFT machines passing a few thousand shares between each other.

VOLUME IS NOT LIQUIDITY, and you just saw what happens when the liquidity you THINK is there is NOT.
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Who wants to place the over/under on TPTB 'fixing' this by changing the LLD rules on the DOW?

The market was seconds from being down -2100 points today and closing for the afternoon.

Rumours swirling that it was no liquidity at European fixed income desks and no EU banks lending that spun it out of control.

TOS hit 50% margin call for futures traders.

Thousands got wiped out today.

This is going to destroy confidence in the markets as all retail traders exit, leaving only HFT and quants to plunge us thousands of points a day for days on end.
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Nasdaq will be canceling ALL trades -60% of the price it was trading or if you gained 60% from where you bought it. (From bloomberg TV)
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For a few minutes today we all got to dip our faces into the "event horizon" and see what is on the other side.
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The Dow plunged Thursday amid buzz in the market that European banks have halted lending.

One trader, on the condition of anonymity, said he heard fixed income desks in Europe shut down early because there was no liquidity — basically European banks are halting lending right now.
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Only time I've seen a day's trade reversed or canceled was in Tom Clancy's book DEBT OF HONOR. A terrorist attack wiped out the stock market, so the government simply hit the reset button and pretended the day's market crash never happened.
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Take a look at ACN, it hit a 0.01 low for the day!?

HFT is obviously broken.

Ya someone turned around 300 bucks into over a million with ACN. Not a bad pay out.
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"Oh boy is this ever going to bring on the lawsuits from the smaller traders. I also heard Schwab stopped trading while this was happening - they are none too pleased with this as it scares away the retail investor."

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If Nasdaq is questioning all trades that had a range of over 60% then this is the list of some of the main stocks over $5 that will have trades cancelled:

MSPD, EXLS, WSII, SORL, WIN, OPNT, EZPW, DXPE, VALU, LINE, PSMT, BRLI, AFFY, HANS

It is interesting because all of the stocks on this list had massive run-ups over the past 6 months, which incluedes 3M and P&G, which also got dumped. It could be that these stocks are not liquid enough to tolerate any large degree of selling and they all were part of a single portfolio liquidation.

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Karl, thanx for keeping us "in the know" and running the forum despite the huge spikes in traffic.

With the MSM out en masse making the "fat finger" excuse, I'm now 99.9% sure this was simply an algo that got triggered, triggering other programs throughout the markets. Either we 1) hit some key level(s) and the computers hit the panic button, only to find no liquidity or 2) whoever coded the original program needs to debug the **** out of it. I'll go with #1 - quants are too smart for their own good.

THIS WAS NOT A FAT FINGER! DON'T BELIEVE THE HYPE! THIS IS WHAT THE STREET WANTS YOU TO THINK LEST THEY GET THEIR SUPERCOMPUTERS TAKEN AWAY FROM THEM.
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Anybody else thinking of the Computer "Skynet" in the Terminator movies as all this was going down? Scary analogy.
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As a Nevada rep pointed out, it's slander to associate Wall Street with casinos. In a casino, everyone knows the vig. On Wall Street, not only is it often impossible to know the vig but they change the rules in the middle of the game.
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Latest IB Notice

To all traders:
Thu May 6, 2010   21:49:58  EST

UPDATE TO TRADE CANCELLATION NOTICE



IB has received notice from the venues listed below of their intent to cancel all stock trades executed between 14:40:00 and 15:00:00 which were executed at a price greater or less that 60% away from the consolidated last print in that security at 14:40:00 or prior. Each has also provided notification that this decision cannot be appealed. While we continue to await confirmation from all venues as to which stocks are affected and the break points at which the cancellations will take place, it now appears likely that the information will not be delivered within the timeframe necessary to be posted to your account until the morning. It should also be noted that IB has received no notice from the U.S. option exchanges or futures exchanges as to whether or not they intend to take similar action.



Again, once all relevant information has been determined, IB will act to process any resultant position and cash changes to your account and will provide notification of this action via email and TWS bulletin. As such changes may adversely affect account equity and/or margin compliance, account holders are advised to monitor their accounts and manage their risk accordingly.


NASDAQ

NYSE ARCA

BATS

DIRECT EDGE

ISE

NATIONAL STOCK EXCHANGE

BTRADE

CBOE

CHX

LAVA

LIQUIDNET

NITE

TRACK ECN
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Hell, why not just make limit down 50 points on the DOW? What's the difference.

Nobody is going to want to participate in this nonsense anymore, even if you were a huge winner today.
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Let me play devils advocate: You put in a market order to sell something during the time of market dislocation. You see a $40 bid but get execution at $0.01. Do you want that trade broken?
Two sides to every trade.
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The only issue I'm not certain on is this:

-Accenture is trading around $40 before it drops
-You pick up 10K shares @ $5
-Stock quickly rebounds. You sell at $20 on the way up. You are happy with your 4-bagger and begin picking colours for your new Maserati.
-The stock rebounds up to ~$41. You left some money on the table, but that's ok!
-The NYSE busts your purchase @ $5. Damn. Bye-bye Maserati.
-The NYSE doesn't bust your $20 sale. It was within the allowed 60%.
-Where does this leave you??? Are you short 10K shares, sold @ $20, showing $200K+ in the red on your account and awaiting a VERY stern margin call?
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Good question, Fin.
There's going to be 100,000 individual variations of it too.
All of which need to be answered definitively before 9:30am.

We could call some of the Euro guys in to help sort it out but I understand they're all otherwise occupied atm.
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Here are affected stocks
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My take on it is that one should realize that during a 'market dislocation' **** like this can happen. Although the 'market' has gone pear-shaped, it is still 'the market' at that exact moment. If you panic and sell at the exact wrong moment, it obviously sucks, but one should factor it in and deal with it and not cry about it not being fair later.

Also why -60% not -55% or -80% or -15%? - it just seems that having some arbitrary amount like that is against free markets (how are the guys that landed deals at -59% any different than those that bought at -61%?). Is it too simplistic to just have a market that shows best (no?) bid and best ask at that exact moment no matter what it is?
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Who's the bigger sheep: J6P, or the guy that keeps placing bets tomorrow?
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If one had a loss on a stock on the way down of 65% and on the rebound his buys were hit and he has 5 gains of 50%, then only the gains count.
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There are also undoubtedly people trading futures right now with money they don't even own.

What a train wreck.
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The Plunge Protection Team is going to have their hands full with this one - the printing presses are already running at full speed. I can't imagine everyone being happy with this 60% rule. Giant cluster **** for sure - and highlighting again the fragility of our financial system. Fascinating to watch how this will play out.
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Talking from several years' experience playing poker online and live, I think there will be a significant drop in participation, but the exchanges - like rigged online poker sites - will never admit to this and may even claim the opposite. In fact, according to some fund manager I heard on the radio while we were in freefall, the retail side was already completely dead from his perspective.

So we may have a market full of phantom traders/volume/liquidity run by computers - digital shills. Who knows, given enough "errors" and doubts, we may be back to all open-outcry.

It's the same with poker. Any serious player that's seen enough poker hands to tell the difference between a rigged game and a truly random one would avoid online play like the plague in favor of a live game with real people, a dealer, and a random shuffle.

Just like the digitization of music and movies opens the door to violation of property rights, the digitization of trading allows all sorts of mayhem like this to propogate.

An event like this might be enough to bring down a few of these exchanges. Think about it from the corporation's perpective. Would you want to issue shares and have them trade on NYSE or Nasdaq after what occurred today?
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Haha. Canceled trades.

Casinos that have take backs don't last very long. Who the **** wants to play?
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What a day.

I watched the plunge in real time and heard the CNBC people say "It's capitulation," and "This is playing out exactly at the same time we see the Greece situation," etc.

And then they come back with this "fat finger" BS. It is thoroughly insulting.

Hope the TF traders didn't get hurt today.

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