Heading under 10,000 on the way!

[FIREd]

My buddies over at Morningstar pretty much pooh-pooh the "fat finger" explanation/rumor.



Because NYSE halted trading temporarily, the programs went looking for buyers outside the exchange where there were no bids. So you got crazy trades at $0.01, etc.

Obviously there are some issues with all this crazy high frequency program trading going on! And with programs and exchanges SO STUPID that they go ahead and trade when one side is a penny? Glad they didn't execute any of my trades!

I think the talk in the next few weeks will be the serious issues today with all-electronic exchanges and program trading.

It that respect this was just like 1987 folks, where program trading gone awry caused a stock market crash. Now, I don't necessarily hold out hope that we recover as quickly as obviously we have a lot more economic challenges today than back then.

Audrey

That makes more sense. If only one stock tanked, I could have believed the fat finger explanation, but too many stocks tanked at the same time for this explanation to hold IMO.

 

[ziggy29]

Heh, and now Bloomberg is saying that NASDAQ in coordination with all the other exchanges will cancel all trades in stocks that dropped 60 percent or better, or some such. Sucks for the luck dumpster divers. This is going to be confusing tomorrow.

Sucks to be stopped out at a 50% loss, then...

 

[Texas Proud]

That makes more sense. If only one stock tanked, I could have believed the fat finger explanation, but too many stocks tanked at the same time for this explanation to hold IMO.

The news I saw said that it was P&G that traded on another exchange for $39 when the 90 second trading halt occurred.... because of this program trading started to kick in... and when it was down so much program trading started to kick in the other way....


I have not heard that any of the big boys actually traded at 1 cent.... but anything could have happened today...

I see a big increase tomorrow...

 

[Bestwifeever]

The talking head on the radio this afternoon said today marked the bottom, no really, this is the bottom. He said he's been predicting it all along and now really, this is the bottom. Really.

 

[audreyh1]

I have not heard that any of the big boys actually traded at 1 cent.... but anything could have happened today...

I see a big increase tomorrow...

Not the big boys. I heard Echelon traded at 1 cent, and Accenture. Some of the CEFs like GIM did too.

Audrey

 

[Nords]

The talking head on the radio this afternoon said today marked the bottom, no really, this is the bottom. He said he's been predicting it all along and now really, this is the bottom. Really.

That's what the Plunge Protection Team wants us all to think...

... until the next bottom.

 

[audreyh1]

More on today's high frequency trading snafu:

What happened today was no fat finger, it was no panic selling by one major account: it was simply the impact of everyone in the HFT community going from port to starboard on the boat, at precisely the same time. And in doing so, these very actors, who in over a year have been complaining they are unfairly targeted because all they do is "provide liquidity", did anything but what they claim is their sworn duty. The Day The Market Almost Died (Courtesy Of High Frequency Trading) | zero hedge

An anti-high-frequency-trading blogger, but still it gives some insight into what is going on with electronic trading today.

Audrey

 

[Khan]

I recall the computer programs doing some weird stuff the first time DIA hit 10,000.

 

[smjsl]

Originally Posted by Oldbabe

". . .what program are they using where you actually type in words to trade instead of numbers?"

I was wondering the same thing.

Would you rather type 10b or 10000000000? ;-)

In any case, I would guess they have a numeric space and a "unit" drop-down indicating whether you are talking "single shares", "thousands", "millions", or "billions"...

Better yet, they should have speech recognition system which does not require any entering but would probably require a confirmation click that what it heard is what you said.

Then again, of all these methods, the fastest one is to type "10b".

P.S. Not saying mistyping "b" and "m" caused the glitch but just [-]answering[/-] speculating about the original statement...

 

[clifp]

I was at an Angel investor conference surprisingly calm at the conference considering the focus of the attendees (making money). My netbook decide to stop working during the crash, screen went blanks. Fixed it this evening by hitting the screen LOL (big hammer theory of computer repair)

I had some good and bad news. I had some old orders to buy the Schwab total market index ETF SCHB at prices well below the market,which got exercised and than turned a profit when the market rebound. Unfortunately some of the orders were in my IRA and didn't have cash to make the purchases oops...

 

[FUEGO]

What happened today was no fat finger, it was no panic selling by one major account: it was simply the impact of everyone in the HFT community going from port to starboard on the boat, at precisely the same time. And in doing so, these very actors, who in over a year have been complaining they are unfairly targeted because all they do is "provide liquidity", did anything but what they claim is their sworn duty. The Day The Market Almost Died (Courtesy Of High Frequency Trading) | zero hedge

Yes, I was expecting there to be more liquidity and better pricing. I didn't trade anything, but I noticed some ETFs I checked on had ridiculous bid-ask spreads in the hour before market close. I don't recall which ETF, but probably one of Vanguard's or iShares. It was trading around $75 with a $3 bid ask spread. 4%!! I figure if these program traders provide liquidity then the trade off of more volatility is ok. But where was the liquidity yesterday? Maybe in other issues I was not looking at.

 

[audreyh1]

Yeah - the whole "but, but, but we provide liquidity to the markets!" claim is ringing particularly hollow right now.

Audrey

 

[IndependentlyPoor]

More on today's high frequency trading snafu:
An anti-high-frequency-trading blogger, but still it gives some insight into what is going on with electronic trading today.

Audrey

Thank you for the link. I read the article, but while I understood the words, I could not make sense of the sentences. The very next thing they said after your quote was

And in doing so, these very actors, who in over a year have been complaining they are unfairly targeted because all they do is "provide liquidity", did anything but what they claim is their sworn duty. In fact, as Dennis Dick shows (see below) they were aggressive takers of liquidity at the peak of the meltdown, exacerbating the Dow drop as it slid 1000 points intraday.

What does it mean to be a "taker of liquidity"?

 

[ziggy29]

What does it mean to be a "taker of liquidity"?

I believe it means the crush of sell orders played a role in shutting down the NYSE for 90 seconds and, in so doing, removed liquidity, caused share prices to fall even more on other exchanges, triggering a lot more selling from programs and from stops being hit. But with the NYSE down, there were very few buyers to match with all the sellers and the free-fall was underway. And furthermore, continued HFTs at that point skewed it even more.

PG selling for $39 and ACN selling for one cent were the results of a lack of a liquid market for selling securities.

Or something like that.

 

[audreyh1]

What does it mean to be a "taker of liquidity"?

I think it means they didn't facilitate the trading and help maintain orderly markets like a market maker is supposed to do. Instead their programs took advantage of a lack of buyers and made the extraordinarily low bids, exacerbating the problem.

In a lot of these financial institution there is a real conflict between their proprietary trading (trading they do for themselves) and whatever service they provide their customers. We seem to keep running into situations where the proprietary trading takes precedence (big surprise that!) and everyone else (including customers) gets hurt.

You really start to wonder why these services exist, because they start looking like leeches more and more every day.....

Audrey

 

[IndependentlyPoor]

I believe it means the crush of sell orders played a role in shutting down the NYSE for 90 seconds and, in so doing, removed liquidity, caused share prices to fall even more on other exchanges, triggering a lot more selling from programs and from stops being hit. But with the NYSE down, there were very few buyers to match with all the sellers and the free-fall was underway.

PG selling for $39 and ACN selling for one cent were the results of a lack of a liquid market for selling securities.

Or something like that.

OK, sounds good. But wow, what a mess for the NYSE. Modern technology has given traders the ability to instantly switch to other exchanges, rendering the NYSE's main weapon against market disruption ( suspending trading) worse than worthless.

 

[ziggy29]

We seem to keep running into situations where the proprietary trading takes precedence (big surprise that!) and everyone else (including customers) gets hurt.

Yeah, I suspect these institutional traders were first in line to get their sell orders executed on the way down and first in line to get the buy orders executed off the brief bottom.

 

[audreyh1]

OK, sounds good. But wow, what a mess for the NYSE. Modern technology has given traders the ability to instantly switch to other exchanges, rendering the NYSE's main weapon against market disruption ( suspending trading) worse than worthless.

Yes, this is exactly what was so well demonstrated yesterday.

And the other exchanges just let programs take advantage.

Audrey

 

[ziggy29]

OK, sounds good. But wow, what a mess for the NYSE. Modern technology has given traders the ability to instantly switch to other exchanges, rendering the NYSE's main weapon against market disruption ( suspending trading) worse than worthless.

It feels like it's to the point that we need the ability to place trades that will not be routed to less liquid exchanges. If someone could have placed a sell order on PG that could *only* be executed at the NYSE, they wouldn't have sold for less than 56 (as opposed to some who probably had their stops hit below 40). It might have taken a few minutes to execute, but at least that provides optional "insurance" for folks placing trades. It seems like that would be critical for folks placing trailing stops.

 

[IndependentlyPoor]

No wonder the crazy swings yesterday. When the NYSE stops trading, the price is free to plunge on infinitesimal volume. A recipe for disaster. We should breath a sigh of relief that we didn't have total. Meltdown yesterday.

 

[FinanceDude]

Is this the financial adviser's vocabulary for "I told you so"? Or is this just calling attention to the clock twice a day?

Not at all, I was just responding to 73Ss454 stating that I told everyone to get out last July.

I may be more bearish than most, but I would have rather seen a gradual increase in the market than a 60% return in a year. Sometimes euphoria and giddiness are not great bedfellows............

 

[audreyh1]

No wonder the crazy swings yesterday. When the NYSE stops trading, the price is free to plunge on infinitesimal volume. A recipe for disaster. We should breath a sigh of relief that we didn't have total. Meltdown yesterday.

Well, actually we did. Down 700 points in 15 minutes is a major meltdown. And I consider trades executing with bids of $0.01 as a "total meltdown" as that is the lowest price you can offer! Ridiculous!

It was just when the media started pointing out some ridiculous trades (like P&G) and how there must be some kind of error that the meltdown halted, and then reversed. I guess that was how long it took for humans to respond to the situation.

Audrey

 

[ERD50]

Originally Posted by audreyh1 View Post
We seem to keep running into situations where the proprietary trading takes precedence (big surprise that!) and everyone else (including customers) gets hurt.

Yeah, I suspect these institutional traders were first in line to get their sell orders executed on the way down and first in line to get the buy orders executed off the brief bottom.

I just don't see how this could work. If the large selling drove the prices down, then any large buying would drive them up. The low prices were because there were few buyers relative to the amounts being sold. The $.01 prices would not exist if there was an order there.

I think this is much ado about nothing. The only people I could see being hurt by this are those with stop limit orders - and those people are ALWAYS taking the risk that they can get stopped out way below their stop price. So if it happens once every couple decades, well - it happens. As stated previously, I NEVER use stop limit orders.

How does this once-in-a-blue-moon event affect the average investor? Nada, IMO. I almost always place limit orders on my buys and sells, and if I don't, I'm watching the price closely. If I'm unlucky enough to get hit by this rare event and sell into a down market, I was just as likely to be buying and get lucky with a great deal.

IMO, this is a big yawner that the news will make try to make a big deal out of, and Congress will cry for more regulation (of what?).

I guess we shouldn't allow furniture stores to have liquidation sales either - the market price of my sofa might be affected for a few days - heavens!

-ERD50

 

[ERD50]

Well, actually we did. Down 700 points in 15 minutes is a major meltdown.

Audrey

And if I napped through it, or was cleaning the basement - the effect on my portfolio was a yawner. It is still above where it was in February.

-ERD50

 

[ziggy29]

I guess we shouldn't allow furniture stores to have liquidation sales either - the market price of my sofa might be affected for a few days - heavens

Comparing a depreciating asset purchased for utilitarian purposes to a pure investment which people only buy for income and/or capital appreciation seems rather odd to me.

And I disagree that it's no big deal. To a long-term investor who didn't get stopped out with a 40% loss, yeah -- in the end it was just another lousy -3% day on the market and didn't produce any enduring financial damage. But the market largely depends on trust, and I think Wall Street was already on shaky ground in terms of trust.