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
------------------
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
Showing posts with label volatility. Show all posts
Showing posts with label volatility. Show all posts
Friday, May 7, 2010
Monday, October 5, 2009
CBOE Volatility Index (VIX)
WikiPedia Entry:
"VIX is the ticker symbol for the Chicago Board Options Exchange Volatility Index, a popular measure of the implied volatility of S&P 500 index options. A high value corresponds to a more volatile market and therefore more costly options, which can be used to defray risk from this volatility by selling options. Often referred to as the fear index, it represents one measure of the market's expectation of volatility over the next 30 day period."
Yahoo Finance Page
"VIX is the ticker symbol for the Chicago Board Options Exchange Volatility Index, a popular measure of the implied volatility of S&P 500 index options. A high value corresponds to a more volatile market and therefore more costly options, which can be used to defray risk from this volatility by selling options. Often referred to as the fear index, it represents one measure of the market's expectation of volatility over the next 30 day period."
Yahoo Finance Page
Saturday, July 18, 2009
Volatility & Algorithmic Trading (Themis white paper)
John Mauldin, an American CFA with some buddies in the establishment (Stratfor) recommends Themis Trading white paper Toxic Equity Trading Order Flow on Wall Street, in his weekly newsletter 'Out of the Box'.
In short, certain market actors (makers?) are involved in mutually beneficial relationships with certain exchanges wherein they use massive computing resources close coupled to the the exchange infrastructure in order to arbitrage the market through algorithmic trading techniques most likely exploiting certain marginal privileges they enjoy as market-makers, together with their unmatched response times, and presumably unmatched pocket depths (hey, if you owned the Fed ?).
Basically they shake the sieve and collect what falls through. Not much gets through, but if you have a million sieves, then you're in business. And everyone else is not.
On an entirely unrelated topic, Goldman Sachs recently reported an INCREASE in earnings of 33 % (according to Reuters) over the last quarter. Now I'm not exactly sure what the period is, but it must be approximately March-June, which is pretty much the bull period of the last bounce, so all I can say is that it would certainly appear as if they timed things to a tee. It should possible be noted that this is a period in which most participants in the real economy, developed and not, continue to experience almost unprecedented levels of adversity.
In the Reuter's article, NY money manager Michael Holland is quoted as saying "Even though I was prepared for really good results, the magnitude of their success in trading I think is breathtaking.", and "They are showing once again that they are the smartest guys in the room.".
Ahem.
In short, certain market actors (makers?) are involved in mutually beneficial relationships with certain exchanges wherein they use massive computing resources close coupled to the the exchange infrastructure in order to arbitrage the market through algorithmic trading techniques most likely exploiting certain marginal privileges they enjoy as market-makers, together with their unmatched response times, and presumably unmatched pocket depths (hey, if you owned the Fed ?).
Basically they shake the sieve and collect what falls through. Not much gets through, but if you have a million sieves, then you're in business. And everyone else is not.
On an entirely unrelated topic, Goldman Sachs recently reported an INCREASE in earnings of 33 % (according to Reuters) over the last quarter. Now I'm not exactly sure what the period is, but it must be approximately March-June, which is pretty much the bull period of the last bounce, so all I can say is that it would certainly appear as if they timed things to a tee. It should possible be noted that this is a period in which most participants in the real economy, developed and not, continue to experience almost unprecedented levels of adversity.
In the Reuter's article, NY money manager Michael Holland is quoted as saying "Even though I was prepared for really good results, the magnitude of their success in trading I think is breathtaking.", and "They are showing once again that they are the smartest guys in the room.".
Ahem.
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