From Zerohedge http://www.zerohedge.com/article/fed-finger-more-observations-esh0-incident
The Fed Finger: More Observations On The ESH0 Incident
Submitted by Tyler Durden on 01/13/2010 22:18 -0500
High Frequency TradingNASDAQnotional value
Fidel Sarcastro submits:
What happened at 12:03pm Eastern Time? There were no reports out, the 10-YR Note auction wasnât until 12pm, and the S&P500 was a bit stonewalled just under 1137.00 after a rally from the dayâs low. As the market advanced slowly through the congestion it hit: a MASSIVE order, or series of orders, lifted the offer in the e-minis. But it wasnât your garden variety large order of 2,000 miniâs â Iâm talking about 114 times that size.
At 11:03am today at the Chicago Board of Trade (12:03pm EST) over a quarter of a million mini-S&P500 orders traded north of 1137.00! (228,000 last count)
I looked at the attached chart in disbelief. Could this be real I wondered? Was it some sort of computer malfunction that added too many zeros to the reported, yet smaller, trades?
No, thatâs not what happened. In fact, a bit of a hullabaloo occurred around my trading booth on the floor of the CBOT as many locals, brokers, and compliance members stared at the aforementioned volume chart in disbelief. As it turns out, all of the trades were indeed valid. None were busted. Moreover, as one of the compliance members told me, he saw the trades listed sequentially (1,000 or 2,000 lot orders) and they all occurred with milliseconds of one another until the massive order was completed.
This order size takes a SERIOUS bankroll to get done. If you are wrong by one-point on a 228,000 lot ES order, you can say goodbye to $11,400,000.00. If you contemplate this size your margin requirement is $1,282,500,000.00, while the notional value is $12,961,800,000.00.
Has a new âplayhaâ hit the scene? Is his nickname âHelicopter?â Has high frequency trading (HFT) taken root in the mini-S&P in a huge way?
In the end it may turn out to have been a âcross trade,â where one institutional firm prearranges a large order with another to clear it in an orderly fashion.
As of now I donât have a firm answer, but whether it was HFT activity, the âHelicopter,â or a massive cross trade, it sure set the bottom in for the afternoon. Everyone in the Dow, Nasdaq, and S&P pits were talking about it and nobody was willing to sell into that massive bid.
