May 6 2010 'Flash Crash' Redux

Thursday March 6 2010, most American equity market indices (S&P500, DOW, NASDAQ) experienced exponential decay, when the price curve started to tend to bankruptcy. The market miraculously recovered at some point, closing only 3.5% down on the day, up from the floor of 10% down - making this one of the single biggest intra-day movement in history ?

Subsequent justifications blame algorithmic trading agents, but the decay curve is smooth, and if you look at the market decay in the leading couple of days, it is clear that this is the climax of a process, not just an on the day event.

The VIX tells a clear story of a period of time, not a single mistake transaction involving mistenly bumping up your order size 3 orders of magnitude.

CNBC shows footage of violent riots in Greece in the period immediately preceding and during the event climax

Asian markets open sharply down, with the Bank of Japan offering additional overnight facilities denominated in, of course, yen - Y2000bn (USD21.6bn), with 75% of this being taken up. This is to cater to the increased demand for Yen that has resulted from the net selling of Euros.

CNBC talking head

max keyser
http://maxkeiser.com/

CNN Money

Business Week

Yahoo

CNBC starts with sentiment damage control

My god, was it a glitch, CYB3R-T3RRORISM, or simply an algo-accelerated rational exit from an overbought point

[Rishi Narang - Inside the Black Box - founder of the hedge fund Telesis Capital]

CNN Money - The Day's Trading in Review

CNBC - Jim Roger's 2 Cents

CNBC - Certain Trades to be Reversed

NYTimes - The Biggest Drops in US Market History

Spreads on US Corporate Paper Increase

Michael A. Yoshikami

High Frequency Trading on the NYSE

CNN Blogs - Markets Turn Wild and Wooly

CNBC - High-Speed Trading Glitch Costs Investors Billions

The Economist - So, About That Crash...

A couple of explanations for the fear of May 6

http://www.reuters.com/article/idUSTRE6471D820100508?loomia_ow=t0:s0:a49:g43:r3:c0.072503:b33799284:z0

Reuters - Global Markets Week Ahead - Greek Crisis Goes Viral

NYT - The Next Day - An Official Explanation Becomes More Candid

Turngin to cosider the role of algo-traders in this event

Thursday’s Talk of New Rules to Prevent Future Stock Free Falls

Should you believe a Cretan who tells you he's lying?

The Monday After

NY-Times REPORT on MONDAY's MARKET RESPONSE

OUT OF PLACE
Dollar Libor Holds Near Nine-Month High After EU Loan Package

>Unsurpisingly, the SEC finds no simple single cause, but is still calling the event market failure instead of a fast-pace market correction.

SEC chairman Mary Schapiro told a Congressional hearing that the markets had "failed" many investors. ... "The sudden evaporation of meaningful prices for many major exchange-listed stocks in the middle of a trading day is unacceptable and clearly contrary to the vital policy objective of maintaining fair and orderly financial markets," Mrs Schapiro said."

This is total bullshit. The market is totally overbought while the global system is under massive pressure. A sell-off was inevitable, its just that the new dominance of algo traders means that a sell-off can now be nastier and more sudden than ever before. What the SEC is saying is that they will manipulate the market until it functions they want it to.

Market Inquiry Focuses on One Trader

Did a Big Bet Help Trigger 'Black Swan' Stock Swoon? - It was actually Taleb's cynicism

Regulators decide that plunge wasn't actually cyber-terrorism after all, whew!

Commentary: Market Madness

-- SHOULD ADD SECTION AT THE END TO SHOW HOW 1987 CRASH ALSO CLIMAXED IN 3 MINS OF TRADING

http://www.marketwatch.com/story/sec-looks-to-avoid-future-flash-crash-2010-11-08

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Program short sales by Waddell & Reed were deemed to have been the cause of the crash by a congression inquiry.

ZeroHedge:
SEC Releases Final Flash Crash Report - Waddell And Reed Blamed As Selling Catalyst

Huffington Post:
'Flash Crash' Report: Waddell & Reed's $4.1 Billion Trade Blamed For Market Plunge

Reuters:
Single trade helped spark May's flash crash