Listen To The Stock Market Flash Crash – Tick by Tick – Read The NANEX Final Report Contradicting The SEC

Listen To The Stock Market Flash Crash – Tick by Tick – Read The NANEX Final Report Contradicting The SEC

NANEX exposes more absurd corruption by our regulators covering up for criminal Wall Street bankers who hold the American economy hostage.

Many of you have heard this clip before. For those of you who have not, buckle up. Audio of a S&P 500 trader quoting the action that was taking place in the futures pit in Chicago at the CME. The market lost nearly $1 trillion within minutes and then recovered most of the losses. The DJIA and S&P 500 futures fell 10% intra-day.

Read this from Nanex (charts at the link):

The Truth About The Flash Crash

We have obtained the Waddell & Reed (W&R) May 6, 2010 trade executions from the executing broker in the June 2010 eMini futures contract. There were 6,438 trades totalling 75,000 contracts. We matched them by time, price and size to the 147,577 trades (844,513 contracts) in the CME time and sales data between 14:32 and 14:52 (they matched exactly). One-second resolution charts of the W&R trades along with other eMini trades are shown below in various time frames.

The SEC report identified a Sell Algorithm selling 75,000 contracts as the cause of the flash crash. If the “Sell Algorithm” in the SEC report refers to the Waddell & Reed trades, then there is a problem. A big one. Looking at the trades in context with the other trades during that time, they do not appear to be significant. The W&R trades also do not occur near the ignition point (14:42:44.075) we identified earlier. Furthermore, the W&R trades are practically absent during the torrential sell-off that began at 14:44:20. The bulk of the W&R trades occurred after the market bottomed and was rocketing higher — a point in time that the SEC report tells us the market was out of liquidity. Finally, the data makes it clear that the algorithm does take price into consideration; you can see it stops selling if the price moves down over a short period of time.

Something is very wrong here.

Excerpt from Barrons:

The Real Flash-Crash Culprits

MEET THE FLASH-CRASH scapegoat. A report by regulators blamed May’s spectacular market break on a single trade by a single “mutual fund complex” identified in the press as Waddell & Reed.

This was as ludicrous as blaming Mrs. O’Leary’s cow rather than lax building codes for the Great Chicago Fire. The official explanation of the May 6 tumult, which saw the Dow plunge by nearly 1,000 points before largely recovering, does not hold up beyond a reasonable doubt.

In fact, the jargon-encrusted back pages of the report suggest that far greater damage was inflicted on investors that day by their brokerage firms. The brokers abandoned them to the wildfire. Call it progress: Never before have so many lambs been roasted so quickly.

The “Findings Regarding the Market Events of May 6, 2010,” by the staffs of the Commodity Futures Trading Commission and the Securities and Exchange Commission,said that although volatility was rising and sellers began to outnumber buyers, a mutual-fund complex initiated a program to sell some 75,000 E-Mini contracts on the Standard & Poor’s 500, valued at $4.1 billion, as a hedge to an existing equity position. E-Minis are electronically traded portions of regular futures contracts. The regulators faulted this fund complex for using a program to feed orders into the E-Mini market at an execution rate of 9% of the total trading volume, and without regard to price or time.

HERE’S WHERE THE REGULATORS’ story starts to fall apart. CME Group, owner of the exchange where the E-minis trade, said the sell order was consistent with market practices. Furthermore, only half the order had been entered as the market fell. And it had been broken up into small orders—nine out of every 100 coming into the market. In any event, this one trade couldn’t have spooked investors because the market is anonymous. Traders didn’t see a single, large seller. What they saw was continuous action.

Categories: ECONOMY

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