Flash Crash Started With A Single Trade

Quote from heech:

Uh, that represents approximately 3% of average daily volume in ES trades. (And on that particular day, probably far less than 3%.) If that's an "explanation" for the flash crash...
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Yes, that's the explanation. The key is not to think of 75,000 contracts as percent of daily volume, but as percent of the total liquidity available during a particular period of time, such as the period of 20 minutes or so during which these contracts have been sold. See the details here: http://sec.gov/news/studies/2010/marketevents-report.pdf

Notable part of the report: "By 2:45:28 there were less than 1,050 contracts of buy-side resting orders in the E-Mini, representing less than 1% of buy-side market depth observed at the beginning of the day".
 
Quote from nonlinear5:

What in particular do you find humorous about it? Waddell put 75,000 ES contracts for sale, which are worth approximately $4.5 billion. That's more than the gross domestic product of many countries. I am not surprised that it would cause a shock and disrupt the market.
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I don't think he thought anything was funny about the flash crash you stupid prick.

Do you understand English?

'cause you sure don't understand wtf your talking about.
 
Quote from heech:

Uh, that represents approximately 3% of average daily volume in ES trades. (And on that particular day, probably far less than 3%.)

If that's an "explanation" for the flash crash... I'm stocking up on toilet paper and bottled water.
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It doesnt take much to get the ball rolling, you send an order that size, and it starts a snowball of stopouts, most programs which sit on the bid are also designed to lift their orders in the case of a gigantic move, so if you send an order for 3% of the average daily volume and it causes the ES to go down 1-3% instantly, and all of a sudden everyone is stopped out, no one in their right mind would sit on the bid through this especially not an automated program designed with fail safes. Plus you have people piling on to short the thing. Then you have trading companies controlling their margin accounts punching people out and adding to the downward pressure due to their risk controls all of this is happening with no bid out. I can see how this happens quite easily.
 
Quote from heech:

Until the next time someone tries to sell 75,000 ES contracts?

Apparently Al-Qaeda doesn't need to hijack a plane, they just need a small firm with DMA access to the futures markets.
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Don't give those idiots any new ideas.

The real question is what is the SEC going to do to make sure there is sufficient liquidity for large orders of this magnitude? Or do we just live with periodic mini-crashes and busted trades? It's the busted trades part that bothers me most.
 
Quote from pspr:

Don't give those idiots any new ideas.

The real question is what is the SEC going to do to make sure there is sufficient liquidity for large orders of this magnitude? Or do we just live with periodic mini-crashes and busted trades? It's the busted trades part that bothers me most.
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This is the question. Thanks. This is the beginning of the end of algorithmic screen trading, a short-lived experiment. Market Makers, take positions...

If chartered market makers are around, manipulators think twice before exposing themselves to billions of margin. Remember what happened to a famous hedgefunder who tried to load up on S&P 500 options? He was sent to the cleaners.
 
Quote from psytrade:

Actually, it started with a big bang, 4 billion years ago. Maybe the SEC can send someone to investigate.
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The SEC couldn't stop the Bernie Madoff Scheme, even when it was under their noes for 10 years, and dispite Harry Markopolos's continuous red flag warnings.

..........Don't expect much from the SEC.
 
I'm looking at a SP500 chart with MACD indicator. About May 6 the blue MACD line crosses 0, the moving averages cross. I'm wondering, is that all there is to the Waddell computer algorithm? Crossover of a couple moving averages triggers a huge sell order?

The red circle marks the crossover.

<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=2970196 \img>
 

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