Credible "flash crash" analysis

Adamus said:
In case nobody else has posted this link yet, I came across this interesting piece from a data provider firm which makes sense to me:

http://www.nanex.net/20100506/FlashCrashAnalysis_Intro.html

Apologies if it's old news.

So it all comes down to some fairly obvious programming errors, it seems.

As they say, to err is human, but to really mess things up you need a computer.
Click to expand...

yes. The Nanex analysis was posted recently by the development group that builds our DTN NxCore datafeed. Its interesting what you can see in the market when your feed timestamps to the nearest quarter millisecond and consolidates multiple markets into a single tape. This analysis is getting pub quite fast as many are tweeting about it.
 
Weird! Occam's Razor says it must be some dumb programmer's mistake.
 
The official report is far more plausible than the nanex thing.

What surprised me was how small the positions the HF traders could take on. I was of course aware that the majority of positions are scratches but to see such small risk limits surprised me.
 
arabianights said:
The official report is far more plausible than the nanex thing.

What surprised me was how small the positions the HF traders could take on. I was of course aware that the majority of positions are scratches but to see such small risk limits surprised me.
Click to expand...

How do the HF get their commissions so low to make it worthwhile? Are they members of the exchanges they trade for instance?
 
Yes, I would have thought many of them will be members. Some may be high tech prop trading outfits that get a package from one of the big investment banks for executing lots of trades at a very low price per trade (with add on prime brokerage, custodial, stock lending, clearing etc)
 
I guess what they gain on the commissions they lose on the computer hardware and software programmers.
 
A lot of exchanges you actually get a rebate greater than comission for being a price maker...
 
sorry. v. busy at the moment, some insane problems with my trading platform.

being a price maker entails putting enough volume through - or is it more involved?
 
Last edited:
Hmm. I thought they only gave rebates for liquidity provision.

I did actually mean I thought your firm would supply bid/ask
 
Not really sure what you mean. I supply a lot of bid and asks but only on exchange.

Rebates depend on exchange. I forget what thresholds are but I think they kick in after 12.5k round trips a month for what I do.
 
Out of interest, is anyone willing to describe slip experienced on stoploss orders on 6 May? I don't use them but I'm interested in how effective they might be in a situation like this.
 
arabianights said:
Not really sure what you mean. I supply a lot of bid and asks but only on exchange.

Rebates depend on exchange. I forget what thresholds are but I think they kick in after 12.5k round trips a month for what I do.
Click to expand...

Sorry. I though your firm was a market maker.
 
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