Single trader sparked Wall Street's flash crash

[Glass]

A computer-driven sale worth $US4.1 billion ($4.24 billion) by a single trader helped trigger the May flash crash, which sent the Dow Jones Industrial Average dropping nearly 1000 points in less than a half-hour and set off liquidity crises that ricocheted between US futures and stock markets.

A report issued on Friday by the US Securities and Exchange Commission and the Commodity Futures Trading Commission determined the plunge was caused when the trading firm executed a computerised selling program in an already stressed market.

The report did not identify the trader by name, but internal documents obtained from futures exchange operator CME Group identified that trader as money manager Waddell & Reed Financial.

The long-awaited report focused on the relationship between two hugely popular securities - E-Mini Standard & Poor's 500 futures and S&P 500 "SPDR" exchange-traded funds - and detailed how high-frequency algorithmic trading can sap liquidity and rock the marketplace.

........

link....... (http://www.theage.com.au/business/markets/single-trader-sparked-wall-streets-flash-crash-20101002-161fr.html)

This was not an unexpected conclusion and the leaks around who they were going to scape goat were as big as any on the Titanic.

I remember reading an article a few days back where all of this "news" was already known. I think it was a ZeroHedge article but I can't find it. Anyone else know of it? Please post em if you have em.

[Buster]

It surely was just a coincidence that the flash crash occurred right during congressional FinReg deliberations and Paul's Audit the Fed hearings.

Could it have any more obvious that it was a warning from the Financial Services industry to leave the looters alone?

>:(

[JDRock]

rothschild s behaviour sparked the first depression.....nothing new.

[ShortJohnSilver]

Does anyone really believe these reports any more?

[osoab]

CME Refutes SEC's Entire 104 Page W&R Scapegoating Drivel In Two Simple Paragraphs (http://www.zerohedge.com/article/cme-refutes-secs-entire-104-page-wr-scapegoating-drivel-two-simple-paragraphs)


submitted by Tyler Durden on 10/01/2010 14:37 -0500

We couldn't have said it better ourselves. From the CME:

Futures and options markets are hedging and risk transfer markets. The report references a series of bona fide hedging transactions, totaling 75,000 contracts, entered into by an institutional asset manager to hedge a portion of the risk in its $75 billion investment portfolio in response to global economic events and the fundamentally deteriorating market conditions that day. The 75,000 contracts represented 1.3% of the total E-Mini volume of 5.7 million contracts on May 6 and less than 9% of the volume during the time period in which the orders were executed. The prevailing market sentiment was evident well before these orders were placed, and the orders, as well as the manner in which they were entered, were both legitimate and consistent with market practices. These hedging orders were entered in relatively small quantities and in a manner designed to dynamically adapt to market liquidity by participating in a target percentage of 9% of the volume executed in the market. As a result of the significant volumes traded in the market, the hedge was completed in approximately twenty minutes, with more than half of the participant's volume executed as the market rallied – not as the market declined. Additionally, the aggregate size of this participant's orders was not known to other market participants.

Additionally, the most precipitous period of market decline in the E-Mini S&P 500 futures on May 6 occurred during the 3½ minute period immediately preceding the market bottom that was established at 13:45:28. During that period, the participant hedging its portfolio represented less than 5% of the total volume of sales in the market.

[osoab]

I posted this on May 6. The link I provided is gone now.

http://gold-silver.us/forum/general-discussion/sticky-this-you-just-saw-the-beginning-of-the-real-au-ag-rally/msg37289/#msg37289



I found the hard copy of what I heard.

From WBBM's site. I only posted up to the relevant part.

Wall St. rollercoaster: Stocks fall nearly 10 pct (http://hosted.ap.org/dynamic/stories/U/US_WALL_STREET?SITE=WBBMAM&SECTION=HOME&TEMPLATE=DEFAULT)


NEW YORK (AP) -- A computerized sell off possibly caused by a simple typographical error triggered one of the most turbulent days in Wall Street history Thursday and sent the Dow Jones industrials to a loss of almost 1,000 points, nearly a tenth of their value, in less than half an hour. It was the biggest drop ever during a trading day.

The Dow recovered two-thirds of the loss before the closing bell, but that was still the biggest point loss since February of last year. The lightning-fast plummet temporarily knocked normally stable stocks such as Procter & Gamble to a tiny fraction of their former value and sent chills down investors' spines.

"Today ... caused me to fall out of my chair at one point. It felt like we lost control," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

No one was sure what happened, other than automated orders were activated by erroneous trades. One possibility being investigated was that a trader accidentally placed an order to sell $16 billion, instead of $16 million, worth of futures, and that was enough to trigger sell orders across the market

[VX1]

A computer-driven sale worth $US4.1 billion ($4.24 billion) by a single trader helped trigger the May flash crash, which sent the Dow Jones Industrial Average dropping nearly 1000 points in less than a half-hour and set off liquidity crises that ricocheted between US futures and stock markets.

A report issued on Friday by the US Securities and Exchange Commission and the Commodity Futures Trading Commission determined the plunge was caused when the trading firm executed a computerised selling program in an already stressed market.

The report did not identify the trader by name, but internal documents obtained from futures exchange operator CME Group identified that trader as money manager Waddell & Reed Financial.

The long-awaited report focused on the relationship between two hugely popular securities - E-Mini Standard & Poor's 500 futures and S&P 500 "SPDR" exchange-traded funds - and detailed how high-frequency algorithmic trading can sap liquidity and rock the marketplace.

........

link....... (http://www.theage.com.au/business/markets/single-trader-sparked-wall-streets-flash-crash-20101002-161fr.html)

This was not an unexpected conclusion and the leaks around who they were going to scape goat were as big as any on the Titanic.

I remember reading an article a few days back where all of this "news" was already known. I think it was a ZeroHedge article but I can't find it. Anyone else know of it? Please post em if you have em.


I just thought it was common knowledge, the one who caused all this.

[Twisted Titan]

Didnt they say the same thing with the "rouge trader" at Solictetal General?

Can they at least say something new???