Thursday, May 6, 2010
60% is your new "Black Swan!"
Today the NASDAQ said that trades that fell 60% away up or down were "fat finger" trades and had to be cancelled.
Did the HFT traders make too much money? Let's go over NASDAQ's previous policy--and here it is--what trade is clearly erroneous:
For executions over $1.75, and up to $25, Nasdaq will bust or adjust if that trade price is 10 percent away from the NBBO. For executions over $25, but less than $50, Nasdaq will bust or adjust if that trade price is 5 percent away from the NBBO. For executions over $50, Nasdaq will only bust or adjust if the trade price is 3 percent away from the NBBO.
Today it is now 60%!
So that will really help Wall Street's confidence! The ruling:
"There is no indication at this time that a Nasdaq market participant experienced a technological failure in connection with this event," said the company in a notice. "There is also no indication that any member firm had a trade error on any NASDAQ OMX system."
(So stocks of $30 billion dollar companies are supposed to trade at two cents or a penny!)
Initial plans called for exchanges to void trades taking place in that period of time at prices more than 30% below or above the pre-2:40 p.m. time period, according to a person briefed on the discussions. This was later amended to the 60% level. A full list of the affected securities can be found at:
So if I'm a HFT programmer, just do the same game again, but stop the game at 55%. Take all the stops out, and then take all the stock that the algos brring with it.
So everybody will know tomorrow's script. Wall Street will buy stocks on the unemployment numbers, and push things up so this looks like a distant memory, and then, the computers will attack again, because they know they have 60% margin to f*ck with the orders and stops left on the screens, even though there isn't any left after today!
And that pullback, will be it.
Because every one with stops was already taken out!
But you were protected only if you lost more than 60%!
With Wall Street math, sanctioned by the regulators!
Posted by Palmoni at 11:02 PM