Credible "flash crash" analysis

[Adamus]

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.

 

[Waterfield]

Found this the other day but haven't got around to reading it.

http://www.scribd.com/doc/31574940/C-F-T-C-S-E-C-Preliminary-Findings-on-Flash-Crash

...just realised that website contains the same pdf.

Good find.

 

[iqfeed]

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.

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.

 

[Mayfly]

There's an update here: http://www.nanex.net/20100506/FlashCrashAnalysis_Intro.html

Cheers

M

 

[Adamus]

Weird! Occam's Razor says it must be some dumb programmer's mistake.

 

[arabianights]

Excellent, thanks to those who posted this

 

[Xeno]

Here's a good update. The official report is out. Mainly down to one trade that wiped out all buyers apparently.

http://online.wsj.com/article/SB10001424052748704029304575526390131916792.html?mod=googlenews_wsj

 

[arabianights]

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.

 

[Adamus]

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.

How do the HF get their commissions so low to make it worthwhile? Are they members of the exchanges they trade for instance?

 

[Xeno]

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)

 

[Adamus]

I guess what they gain on the commissions they lose on the computer hardware and software programmers.

 

[arabianights]

A lot of exchanges you actually get a rebate greater than comission for being a price maker...

 

[Adamus]

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?

 

[arabianights]

no it means posting bid offer rather than hitting/lifting

 

[scose-no-doubt]

your place must do that eh Rab

 

[arabianights]

I get rebates but it nothing to do with supplying liqudiity

 

[scose-no-doubt]

Hmm. I thought they only gave rebates for liquidity provision.

I did actually mean I thought your firm would supply bid/ask

 

[arabianights]

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.

 

[Dommo]

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.

 

[scose-no-doubt]

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.

Sorry. I though your firm was a market maker.