Welcome to the world of High Frequency/Algorithmic trading.
In this case, essentially every person that had a "stop loss" order was just hunted down by a wave of HFT programs and all those stop loss orders were triggered, which send "market orders" which means, fill my order at the current market price.
When everyone does this at the same time, there are more sellers than buyers so prices drop dramatically. However, this presents an opportunity for HFT programs especially when they have similar strategies, meaning they all are doing the same thing, pushing the market in the same direction. Now, the HFT programs forced people to get stopped out, then they bid the market up and buy, which pushes it right back to the prior level.
Take a look at AAPL, RIMM, GOOG, SPY, etc. and you'll see it is all the same pattern.
There are far too many speculative comments on this story. I normally find the comments on HN to be well thought and reasoned - not rapid posting of wild rumors that are currently prevalent.
Perhaps people should wait until the facts emerge before posting more stories filled with inaccurate information.
"There were a number of erroneous trades," said NYSE spokesman Rich Adamonis."Our guys just told me Nasdaq is investigating the erroneous trades. What happened today in P&G for instance, the bad print was on Nasdaq, not here," he said, referring to a 37 percent plunge in Procter & Gamble Co.
And more - including canceled trades of Accenture:
Nasdaq OMX Group Inc. said it’s investigating potentially erroneous trades involving multiple securities between 2:40 p.m. and 3 p.m. New York time, when the U.S. stock market tumbled.
Trades in Accenture Plc that drove the second-largest technology consulting company’s stock price down more than 99 percent to a penny were canceled by the CBOE Stock Exchange, according to data compiled by Bloomberg.
A total of 19 trades of 100 shares each were executed at 1 cent in seven seconds from 2:47 p.m. to 2:48 p.m. in New York, a minute after the Dow average plunged by the most since the market crash of 1987, the data showed.
Eighteen of the trades were executed on the CBOE Stock Exchange and were canceled. The first trade that sent Accenture to a penny was executed on the Nasdaq Stock Market. That transaction has yet to be canceled, the data showed.
I think the speculations and rumors are very interesting and relevant to learning more about how the market works (or doesn't work), a topic that no one is ever going to have enough "facts" to fully understand.
I have a question as a complete outsider: how much of what's happening is being driven directly by human-driven transaction and how much is automated computer-driven trading? (Yes, I understand these are hazy terms.)
And, perhaps more fundamentally: how much of market volatility is the consequence of automated decision making? It seems, again naivete is at play here, but it seems like that could be a pretty unstable system.
I guess I think of it like this: the U.S. utilizes Permissive Action Links and other security measures to provide for launch security. Given the centrality of the economy (though not wanting to overstate it), it seems like a large-scale mistake in some models could cause misfiring in ways we wouldn't want but that a human agent could (theoretically) prevent.
This is a genuine panic -- probably the start of pretty dramatic decline. Sovereign debt is going to be the new contagion. If the contagion spreads, the gains to consumption over the past year could be demolished. These gains were bought at the price of government stimulus -- i.e. soverign debt. Businesses are not yet stable enough to weather another downturn soundly; governments are already grossly over-extended.
Current status: probably a fairly rational reflection of the badness of the situation (which is not new, and although serious, probably not catastrophic).
The best commentary I have read so far is from Phil's stock world:
This is everything that is wrong with program trading in a nutshell and I am telling you that this was a multi-billion dollar crime. Someone "fat-fingered" Billions of shares instead of millions and that’s all it takes to send the markets down 10% in one day and the only reason trading didn’t shut down was because Mr. Fat Finger just so happened to make his mistake minutes after the usual trading brakes come off at 2:30. What a friggin coincidence, right? Well, bad luck to all who got wiped out and what a funny stroke of luck for those with multi-billion dollar shorts (including us fortunately so we shouldn’t complain too loudly). It’s amazing what "THEY" get away with right in front of us, in broad daylight….
If we had papered over our economic problems, I could see this drop as justified.
but we've paid people to buy houses, cars and appliances. And we've given billions to banks so they can lend it back to the government at a tidy no-risk profit.
So, this correction makes no sense. The stock market should be zooming to the moon.
I could also see this justified if we had completely failed to bring the lenders, lendees, brokers, appraisers and CDS originators who committed massive fraud to justice. So this makes no sense to me either. :D
This seems to have been expected given the European markets today. It's all over concern for Greek default. Which makes Spain and Portugal up next, which is the bigger concern since they are a larger part of the Euro-zone economy.
One benefit of this all (to Americans), is that the dollar has gotten stronger against the Euro, so while the markets are losing ground, the dollar can buy more from Europe.
"I think the machines just took over," said Charlie Smith, chief investment officer at Fort Pitt Capital Group. "There's not a lot of human interaction. We've known that automated trading can run away from you, and I think that's what we saw happen today."
You're not exactly getting out in front of that one, eh?
Ok, so you find a way to bet on Greece failing... don't you think the people on the other end of that deal are also watching CNN and have priced the deal accordingly?
well considering the debt now has junk status you'd just buy it at pennies on the dollar (like the people buying the bad mortgages) and hope the austerity measures pass and they get their shit together.
Google is secretive about its search algorithm to prevent people from gaming the system; wondering if the major stock exchanges do something similar...
Can anyone explain (and possibly cite sources) what the price represents that is displayed when you obtain a stock quote directly from one of the major exchanges?
Is it:
A) The highest unfilled bid
B) The lowest unfilled ask
C) The most recent filled trade
D) The most recent trade at some min. % of float
E) Some combination of the above
F) Other: _______________________
This is a teachable moment and would go a long way towards helping us understand what happened. On the surface, most of these pricing models seem incredibly easy to game.
Bonus; are other quote sources priced using alternative methods? If so, please explain.
You should be able to get any of this information - a good broker will always show you a), b), and c), and using tick-by-tick data in most markets you can figure out d).
Not so much secrecy; however, that doesn't mean there aren't errors, and it now sounds like today there were a few coming through NASDAQ re: Proctor and Gamble, which made the brief decline appear a lot more catastrophic than it actually was.
Here is the story: Today was a big bill auction day. Ok. Just chill out for a minute and let me explain.
China ain't no fool. These erroneous trades were made 10 minutes prior to a bill auction. This is just to make sure that selling these bills will get a high return and low rate. It was a great time to sell at the stroke of noon.
[+] [-] joe-mccann|16 years ago|reply
In this case, essentially every person that had a "stop loss" order was just hunted down by a wave of HFT programs and all those stop loss orders were triggered, which send "market orders" which means, fill my order at the current market price.
When everyone does this at the same time, there are more sellers than buyers so prices drop dramatically. However, this presents an opportunity for HFT programs especially when they have similar strategies, meaning they all are doing the same thing, pushing the market in the same direction. Now, the HFT programs forced people to get stopped out, then they bid the market up and buy, which pushes it right back to the prior level.
Take a look at AAPL, RIMM, GOOG, SPY, etc. and you'll see it is all the same pattern.
[+] [-] sonnym|16 years ago|reply
Perhaps people should wait until the facts emerge before posting more stories filled with inaccurate information.
[+] [-] jsm386|16 years ago|reply
"There were a number of erroneous trades," said NYSE spokesman Rich Adamonis."Our guys just told me Nasdaq is investigating the erroneous trades. What happened today in P&G for instance, the bad print was on Nasdaq, not here," he said, referring to a 37 percent plunge in Procter & Gamble Co.
The Nasdaq said it is investigating the plunge.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aQKb...
And more - including canceled trades of Accenture:
Nasdaq OMX Group Inc. said it’s investigating potentially erroneous trades involving multiple securities between 2:40 p.m. and 3 p.m. New York time, when the U.S. stock market tumbled.
Trades in Accenture Plc that drove the second-largest technology consulting company’s stock price down more than 99 percent to a penny were canceled by the CBOE Stock Exchange, according to data compiled by Bloomberg.
A total of 19 trades of 100 shares each were executed at 1 cent in seven seconds from 2:47 p.m. to 2:48 p.m. in New York, a minute after the Dow average plunged by the most since the market crash of 1987, the data showed.
Eighteen of the trades were executed on the CBOE Stock Exchange and were canceled. The first trade that sent Accenture to a penny was executed on the Nasdaq Stock Market. That transaction has yet to be canceled, the data showed.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3ti...
[+] [-] jfornear|16 years ago|reply
[+] [-] jimmyrcom|16 years ago|reply
IS THIS NOT WHY YOU ARE HERE?
Personally I checked only to see everyones noodles flailing.
[+] [-] supaflyhigh|16 years ago|reply
[+] [-] migpwr|16 years ago|reply
[+] [-] jrockway|16 years ago|reply
[+] [-] thwarted|16 years ago|reply
[+] [-] unknown|16 years ago|reply
[deleted]
[+] [-] boredguy8|16 years ago|reply
And, perhaps more fundamentally: how much of market volatility is the consequence of automated decision making? It seems, again naivete is at play here, but it seems like that could be a pretty unstable system.
I guess I think of it like this: the U.S. utilizes Permissive Action Links and other security measures to provide for launch security. Given the centrality of the economy (though not wanting to overstate it), it seems like a large-scale mistake in some models could cause misfiring in ways we wouldn't want but that a human agent could (theoretically) prevent.
[+] [-] alttab|16 years ago|reply
Look at market trading volume over the last 15 years.
[+] [-] jodrellblank|16 years ago|reply
[+] [-] px|16 years ago|reply
[+] [-] chasingsparks|16 years ago|reply
Oh, happy days.
[+] [-] spif|16 years ago|reply
Things seem rather stable at -4% now...
[+] [-] pw0ncakes|16 years ago|reply
Current status: probably a fairly rational reflection of the badness of the situation (which is not new, and although serious, probably not catastrophic).
[+] [-] borism|16 years ago|reply
[+] [-] ElliotH|16 years ago|reply
Seems to be about Greece.
[+] [-] krishna2|16 years ago|reply
This is everything that is wrong with program trading in a nutshell and I am telling you that this was a multi-billion dollar crime. Someone "fat-fingered" Billions of shares instead of millions and that’s all it takes to send the markets down 10% in one day and the only reason trading didn’t shut down was because Mr. Fat Finger just so happened to make his mistake minutes after the usual trading brakes come off at 2:30. What a friggin coincidence, right? Well, bad luck to all who got wiped out and what a funny stroke of luck for those with multi-billion dollar shorts (including us fortunately so we shouldn’t complain too loudly). It’s amazing what "THEY" get away with right in front of us, in broad daylight….
[+] [-] px|16 years ago|reply
[+] [-] alphaBetaGamma|16 years ago|reply
[+] [-] potatolicious|16 years ago|reply
[+] [-] stretchwithme|16 years ago|reply
but we've paid people to buy houses, cars and appliances. And we've given billions to banks so they can lend it back to the government at a tidy no-risk profit.
So, this correction makes no sense. The stock market should be zooming to the moon.
[+] [-] rrhyne|16 years ago|reply
[+] [-] mbreese|16 years ago|reply
This seems to have been expected given the European markets today. It's all over concern for Greek default. Which makes Spain and Portugal up next, which is the bigger concern since they are a larger part of the Euro-zone economy.
One benefit of this all (to Americans), is that the dollar has gotten stronger against the Euro, so while the markets are losing ground, the dollar can buy more from Europe.
[+] [-] chaosmachine|16 years ago|reply
"I think the machines just took over," said Charlie Smith, chief investment officer at Fort Pitt Capital Group. "There's not a lot of human interaction. We've known that automated trading can run away from you, and I think that's what we saw happen today."
Welcome to the future?
[+] [-] tortilla|16 years ago|reply
[+] [-] spif|16 years ago|reply
[+] [-] jfornear|16 years ago|reply
[+] [-] joubert|16 years ago|reply
[+] [-] laut|16 years ago|reply
Buying a few thousand $ worth at a penny wouldn't have been a bad trade.
http://finance.yahoo.com/q?s=ACN
EDIT: Such as trade would most likely be cancelled though.
[+] [-] startuprules|16 years ago|reply
[deleted]
[+] [-] karzeem|16 years ago|reply
[+] [-] eli|16 years ago|reply
Ok, so you find a way to bet on Greece failing... don't you think the people on the other end of that deal are also watching CNN and have priced the deal accordingly?
[+] [-] dschobel|16 years ago|reply
[+] [-] maukdaddy|16 years ago|reply
[+] [-] alphaBetaGamma|16 years ago|reply
[+] [-] drsnyder|16 years ago|reply
[+] [-] nkassis|16 years ago|reply
[+] [-] joubert|16 years ago|reply
[+] [-] cschneid|16 years ago|reply
[+] [-] joelhaus|16 years ago|reply
Can anyone explain (and possibly cite sources) what the price represents that is displayed when you obtain a stock quote directly from one of the major exchanges?
Is it:
A) The highest unfilled bid
B) The lowest unfilled ask
C) The most recent filled trade
D) The most recent trade at some min. % of float
E) Some combination of the above
F) Other: _______________________
This is a teachable moment and would go a long way towards helping us understand what happened. On the surface, most of these pricing models seem incredibly easy to game.
Bonus; are other quote sources priced using alternative methods? If so, please explain.
[+] [-] ewjordan|16 years ago|reply
Not so much secrecy; however, that doesn't mean there aren't errors, and it now sounds like today there were a few coming through NASDAQ re: Proctor and Gamble, which made the brief decline appear a lot more catastrophic than it actually was.
[+] [-] nickpp|16 years ago|reply
Which means the debt issues are spreading in Europe... Not that US is in a much better position...
[+] [-] obsaysditto|16 years ago|reply
http://www.xe.com/ucc/convert.cgi?Amount=1&From=EUR&...
[+] [-] earle|16 years ago|reply
Some happy people in the futures market who bought the effects at < 10k!
[+] [-] nostromo|16 years ago|reply
Similar to Magnatar, this is the "lose a little money to make a lot more" strategy.
[+] [-] amvp|16 years ago|reply
[+] [-] LoudRoar|16 years ago|reply
Here is the story: Today was a big bill auction day. Ok. Just chill out for a minute and let me explain.
China ain't no fool. These erroneous trades were made 10 minutes prior to a bill auction. This is just to make sure that selling these bills will get a high return and low rate. It was a great time to sell at the stroke of noon.
Chillax.