ANOTHER FLASH, THIS TIME AGAINST NASDAQ, BUT NOT TO WORRY, IT WAS JUST ... ~ hehe Oops
Readers
of this website know I'm very suspicious of flash crashes, those sudden
market down turns where stocks, or even a few stocks or a single stock,
plummet in value in a matter of second due to the sudden action of High
Frequency Trading (HFTs) on "dark pools." I have advanced various
hypotheses to explain this behavior, from the possibility that
artificial intelligence is already here, looming, as it were, in the networks
of these trading concerns, to the possibility that someone might be
using them to probe market cyber-security and vulnerabilities. Well, so
many people saw this one, and sent me this article, that I have to
extend my high octane speculations once again. As one individual who
shared this article stated in his email, it raises... "questions."
Here's the story from our friends at Zero Hedge:
Ponder these statements:
Nasdaq has issued a market-wide trading halt amid what appears to be a "glitch" that sent a number of the largest Nasdaq-listed stocks to crash or spike to exactly $123.47 per share.This move crashed the value of companies including Amazon and Apple, sparked chaos in Microsoft, while sending Zynga rocketing up more than 3000%.On the eve of the US Independence Day holiday and in after-hours trading, The FT reports that market data show that companies such as Apple, Amazon, Microsoft, eBay and Zynga were repriced at $123.47.The Bloomberg data terminal listed either “market wide circuit breaker halt — level 2” or “volatility trading pause” on all the stocks affected.
And then, towards the end of the article, we read this:
In a statement, Nasdaq said the glitch was related to “improper use of test data” sent out to third party data providers, and said it was working to “ensure a prompt resolution of this matter”. In cases of any clearly erroneous data, trades made are cancelled. (All emphases in the original)
Note
the implicit assumption: the "safety valve" or "Market wide circuit
breaker halt" gets tripped when volatility reaches a certain level. That
should trigger the question that some former quants want answered, but
it appears not to be "getting through": is volality itself a certain
enough epistemological foundation on which to assume that
algorithmicly-driven trades are not altogether divorced from human
market realities? In other words, does the mere absence of such
phenomena on a trading day mean that real human market conditions are
being reflected? I would submit that this is not so.
But
there's something else here, and it should give everyone considerable
pause: these "glitches" appear to be happening with no end in sight, and
therefore, how does voiding these trades contribute to the healthiness
of our markets, if one has to "lose time" and a potentially whole day of
trades to "reset" after a "glitch"? Ultimately, this would seem to be a
very inefficient way to conduct trades. However what disturbs me is the
constant appeal, on such events, to the ever-present "glitch." We've
had several such "glitches" since the famous May 2010 flash crash. One
might as well say that these events are due to "gremlins in the system";
such an assertion would possess just as much rational explanatory power
as the ever-useful "glitch," and this is a key to the glaring problem
once again: our markets are not transparent, and not reflective of
genuine human market conditions. I begin to think that, perhaps,
"gremlins in the system" might even be a more useful explanation, for
that at least would seem to imply that perhaps some of these trading
networks have "woken up."
Whether or not that high octane speculation be true, there are a couple of other
problems here that greatly puzzle and disturb me. Who got to decide,
after the "reset", that various stocks were repriced at $123.47 per
share? On what basis was this decision taken, or did it, too, fall
within some agreed-upon artificial protocol adopted in the case of "how
to reset market prices in the event of a flash crash?" Who (or what)
took this decision? What was the explanation?
Finally,
this new "glitch" was, according to Nasdaq, related to "improper use of
test data sent out to third party data providers."
Oh really!
Ok... what was the test data? and WHO were the third parties? Was their "improper use" of that data intentional or not? It's the general lack
of any useful information here that once again states, as clearly as
possible, that the market is not transparent, and that it ill-reflects
any human market realities or analysis of the value of the shares
affected. Did that "improper use" of "test data" constitute an attempt
to deliberately probe Nasdaq's potential cyber vulnerabilities? And if
one can "improperly use test data" to create a "glitch" that leads to
suspension of trading, why not use it to erase all records of trades
altogether? Of course, I can hear it now: "Oh we have backup systems
and there's no danger of that," and etc &c usw. and k.t.l. All of
this is a nice euphemistic way of saying that the markets have little to
no integrity.
I don't know about you,
but every intuitive bone I have says there's much more to this story,
and to the whole phenomenon of flash crashes, than meets the eye, and
that "they" don't want to talk about it, either because they know what's
really going on, or - worse - don't really know what's going
on. Why do I get the queasy feeling that this is all related to the
Inslaw scandal and the theft of its PROMIS software? https://gizadeathstar.com/2017/07/another-flash-time-nasdaq-not-worry-just-test/
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