This Nasdaq thing

[AllentownJake]

With canceling trades...going to unleash havoc on the Mutual Fund companies and Insurance Companies tomorrow morning.

Because if someone jumped out of a heavy Nasdaq fund because they were watching that during work in their 403(b), annuity, or mutual fund during that time period.

Yes they get NAV at the end of the day, however the funds get gains and losses during the day, so if the fund manager was going nuts....

Plus, if you panicked and put in an order during that time period, do you have the right to cancel your sell order tomorrow?

Going to be a fucking terrible tomorrow for everyone in that industry at the home office, not to mention the regulatory agencies, agents, and financial advisers.

Hope the Temp Agencies and printers are ready.

[Cali_Democrat]

1. Just think of all the margin calls that occurred today

Positions liquidated when the Dow Jones was down 1000 points then they see the Dow climb back up big time but they can't participate because their positions were liquidated!

It's a deadly game and not for the faint of heart. I always trade on cash and never use margin.

I'm sure many active traders went broke in mere seconds.

[AnArmyVeteran]

2. The major Wall Street banks have virtually zero collateral.

They don't have to worry about margin calls. They just gamble with other people's money. They take the wins and pass of the losses to us. It's capitalism at its best! Do you think you can go to Vegas with nothing in your pockets and get to play in the big stakes games? That's what the corrupt banks are doing on Wall Street. I say close down the entire street of financial frauds and send all the money, if any, back to local banks and start over. If one of your 20 local banks fails you can just go to one of the other 19. But with 5 banks holding assets worth 63 percent of our gross national product is a national defense issue and anything that threatens the US should be addressed with a quick action by our military. Instead of blasting away at mountains half way around the world why isn't our military at our borders defending them or occupying Wall Street to purge it of all the schemers and scammers?

[AllentownJake]

10. They are insolvent

If a margin call came on any one of them, they would fall apart faster than Lehman did.

The healthiest is probably JPMorgan.

[AllentownJake]

3. This was sick

I was at a banquet for the non-profit class I am involved in since landing a job a week ago with one I've been working part time in for 4 months while unemployed. Got home tonight and said holy shit, never saw that or thought that. I was considering a short yesterday. Kicking myself today.

[TexasObserver]

4. It's going to be a historic clusterfuck tomorrow.

No matter what the actual cause of this event and no matter what the basis of the "do over" ruling, this is going to send a second wave of fear through the market. At a minimum, the market was tricked into a stampede by an electronic mistake or manipulation.

Will there be more sellers than buyers Friday? Probably.

[A HERETIC I AM]

5. Or not.

The market could just as easily close up 300 points.

[AllentownJake]

6. Yes with the exact market values of the securites of 5/5/10

They do that, my theories on the Federal Reserve intervention on the markets become less tin foil.

[TexasObserver]

8. The clusterfucker is a result of the "do over" ruling. It will be there.

I make no prediction on where the DOW ends tomorrow. It could go up or down, and it could move 300 points, or more, or less.

The clusterfuck will be the impact on the trades made in the window, and the undoing of those. Sure, they can undo the trade, but they can't undo the damage felt by those who sold or bought in the panic. There are trades that will count, and there are big losers and winners in those.

No matter what else happens tomorrow, the do-over is a huge clusterfuck and its effects will be felt irrespective of where the DOW average lands at closing bell Friday.

[AllentownJake]

9. Totally uncharted territory

In my 5 years of my former life doing securities compliance audits I can't recall ever even reading anything like this...I don't even know if there is a break glass in case of emergency manual for this clusterfuck.

[TexasObserver]

23. I don't recall it ever happening in the past 30 years, Jake.

I've followed the markets closely for 35 years, and I've been pretty knowledgeable for 30 of those years. I do not recall there ever being such an event. It has to impact investor confidence in the system.

[AllentownJake]

7. Historic Mixture of Counter Party risk with a historic fuck-up

The trader that did the fuck-up will have counter culture trading T-shirts made of them. However the market was going to close down at least 200 points with the failed bailout of Greece and the counter party risk of European finance.

[Statistical]

12. More like 300 down and it did.

Nobody is talking about the order decline before 2:40 and after 3:00 pm. Yesterday was a crappy down day for a lot of reasons.

The decline from 10458 @ 14:40 to 9978 @ 14:48 and then the snap back 10479 @ 14:58 wasn't due to Greece or European financial.

The situation in Greece didn't get massively worse between 14:40 and 14:48 and then suddenly massively better between 14:48 and 14:58.

[AllentownJake]

14. It hit a point and the Algos went nuts

I think they basically shut off the computers.

Who knows.

As far as terminating orders for a period of time, I can't recall what the procedure is for that on anyone's desk or the procedure for dealing with the aftermath of those actions.

[Statistical]

11. Not all of the selling was due to panic.

Many people have stop loss orders already in place.
Also people trading on margin (and that includes big players like mutual funds) will get a margin call and on a drop like the broker isn't going to wait he/she (well more likely it = computer) will simply liquidate.

If the drop was based on reality that would be how the cookie crumbles. When it is due to massive inside rigging called High Frequency Trading that run among like a Terminator killing every stock in sight it is another thing.

NASDAQ and NYSE set the rules. They reserve the right to bust trades. I was on the wrong side of a busted trade. An oil ETF was being liquidated and someone sold me an ETF for $3 less than the liquidation price. NYSE ruled the ETF should never have been traded that day and busted the trade. I "lost" $6000 in profit. It sucks to be on the wrong side of a busted trade but I didn't feel like I really earned that money anyways.


Still this highlights a couple things:
1) HFT are a financial weapon of mass destruction. The "handlers" can no longer control the ultra complex trading programs.
2) Be wary of stop loss orders. Consider buying a put option instead to protect downside risk
3) We need more financial reform. Even many brokers on CNBC were calling for financial reform (speficially for derivatives and HFT).

[AllentownJake]

13. Have you heard the tape from the pits yet on Zero Hedge

Sounds like the crew on the Hindenburg when the fire started.

[tekisui]

15. I'd like to hear that, if you have a link.

I have been really confused about what happened yesterday. I had no idea that there was even an option for 'do-overs' in trading. How can you give do-overs to people reacting to a 'mistake', yet not give do-overs to people reacting to the correction or reacting to the reaction. Time moves on, and everything coming after the mistake is effected. I just don't understand the mulligans.

[AllentownJake]

16. We are in uncharted waters with this one

I don't recall this ever happening before, but I could be totally wrong. In any event do overs are like bailouts, bad for long term financial health.

http://www.zerohedge.com/sites/default/files/Market%20Crash.mp3

[tekisui]

17. That is scary.

[Statistical]

18. trade busts are pretty common.

However never before (as far as I can remember) on a scale this large.

Usually it is an issue with a single security. Sometimes a security should be halted bur not all Brokers get the word and trading still occurs (directly broker to broker or customers inside brokerage). Usually those trades will be busted.

Also there can be issues with individual stocks related to trading programs, or failures of market makers (market maker system goes down all liquidity in a stock goes to 0).

I have been in busted trades twice and both times I was on the wrong side of it. I wasn't affected yesterday though although I did buy to cover a call spread on SPX near the bottom. Was pretty tough to get price discovery there was no liquidity couple dollars between bid and ask and I had to close both sides of the trade. Hopefully they don't bust that.

Still this is unprecedented in the size and scope of the chaos.

[AllentownJake]

19. I've never heard of this occuring for an entire exchange

The entire Nasdaq transactions are voided for a period of time...

[Statistical]

20. Me either. I don't think it is every transaction is it.

I thought it was certain securities and prices outside a certain window.

[AllentownJake]

21. There is a list

It is pretty fucking long.

[Statistical]

22. Agreed it is a lot of stocks.

Like I said trading busts aren't that rare however they have never been this large in scope before (at least not one that I can remember).