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Breaking News Nasdaq Flash Crash 20th Dec 2012 Globex.Breaking news Nasdaq mini Flash Crash 20th December 2012 During Globex Overnight Session High Frequency Trading May Be Running Amok again or are they trying to kill off the santa claus rally
watch this video showing the sudden drop in the Nasdaq overnight over 55 points thats a huge move and it happened in a little over an hour unheard of in a market whose average
move is aprox 12 points daily ,what or whos to blame,well obviously hfts would be suspect number one or some trader that just pushed the wrong button either way it affected the Euro USD as well as Gold and Crude as well as the Dow Jones,The Russell Tf and The Emini which all dropped quite a distance in a very short space of time the markets have changed and this thing will happen more and more you should consider getting
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Definition of A Flash Crash Courtesy Of Wikepedia Creative Commons Licence
From the SEC/CFTC report itself:
The combined selling pressure from the sell algorithm, HFTs, and other traders drove the price of the E-Mini S&P 500 down approximately 3% in just four minutes from the beginning of 2:41 pm through the end of 2:44 pm. During this same time cross-market arbitrageurs who did buy the E-Mini S&P 500, simultaneously sold equivalent amounts in the equities markets, driving the price of SPY (an exchange-traded fund which represents the S&P 500 index) also down approximately 3%.
Still lacking sufficient demand from fundamental buyers or cross-market arbitrageurs, HFTs began to quickly buy and then resell contracts to each other -- generating a "hot-potato" volume effect as the same positions were rapidly passed back and forth. Between 2:45:13 and 2:45:27, HFTs traded over 27,000 contracts, which accounted for about 49 percent of the total trading volume, while buying only about 200 additional contracts net.[8]
As prices in the futures market fell, there was a spillover into the equities markets. The computer systems used by most high-frequency trading firms to keep track of market activity decided to pause trading, and those firms then scaled back their trading or withdrew from the markets altogether.[9][10][11][12]
The New York Times then noted, "Automatic computerized traders on the stock market shut down as they detected the sharp rise in buying and selling."[11] As computerized high-frequency traders exited the stock market, the resulting lack of liquidity "...caused shares of some prominent companies like Procter & Gamble and Accenture to trade down as low as a penny or as high as $100,000."[11] These extreme prices also resulted from "market internalizers,"[17][18][19] firms that usually trade with customer orders from their own inventory instead of sending those orders to exchanges, "routing 'most, if not all,' retail orders to the public markets -- a flood of unusual selling pressure that sucked up more dwindling liquidity."[12]
While some firms exited the market, firms that remained in the market exacerbated price declines because they "'escalated their aggressive selling' during the downdraft."[9] High-frequency firms during the crisis, like other firms, were net sellers, contributing to the crash.[9][10][11][12]
The joint report said prices stopped falling when, "At 2:45:28 pm, trading on the E-Mini was paused for five seconds when the Chicago Mercantile Exchange ('CME') Stop Logic Functionality was triggered in order to prevent a cascade of further price declines. In that short period of time, sell-side pressure in the E-Mini was partly alleviated and buy-side interest increased. When trading resumed at 2:45:33 pm, prices stabilized and shortly thereafter, the E-Mini began to recover, followed by the SPY."[8] Or as The New York Times reported, "The rout continued until an automatic stabilizer on the futures exchange cut in and paused trading for five seconds, after which the markets recovered."[11]
The joint report noted that after a short while, as market participants had "time to react and verify the integrity of their data and systems, buy-side and sell-side interest returned and an orderly price discovery process began to function," and that by 3:00 pm (EDT), most stocks "had reverted back to trading at prices reflecting true consensus values" and the Flash Crash was over
