Algos Gone Wild
A rogue algorithm wreaked havoc on more than 100 stocks today. It appears the algo was executing a continuous auto-buy on some issues like WFC, VZ, RSH, and BBY. It appears it was executing a continuous auto-sell program on other issues like PEP, and JWF. Full analysis of the tape:
Watching your video tells me a lot of people got screwed today out of millions of dollars, maybe billions. One to check out AMT trading down 2.81 in pre-market then trading to high of $75.62 in just minutes. How is that possible???? PEOPLE MADE MONEY VERY UNFAIRLY ALSO. It was too late for me to sell there, I looked at the high and thought had to be seeing things. I would’ve sold there at a new 52 week high. I am a retail investor with money in the market and continuously look to sell to take more money out of the market. This kind of activity does not bode well for us retail investors who are just trying to make some retirement money!!!!
Had a fun time listening to your commentary! Here is my post on how to fix things: http://wp.me/p1ePZy-19p
A simple recipe for efficient and honest stock and futures markets. This fixes HFT, naked shorting, position limits, margin determination, and questionable floats.
On exchanges: (private parties can have their own rules.)
- NO EXCEPTIONS: No exceptions for specialists, locals, nobody.
- Margins for everything and everybody: 110% of maximum 24 hour high/low price range for the past 3 months, updated every minute.
- Bids and asks are cued up and batch executed in 1 second intervals.
- All orders persist for a minimum of 2.1 seconds.
- Maximum position limit is the greater of 5% or 150% of trailing 12 months of Issued and or Stopped contracts on all futures contracts.
- Whoever has a miss-trade, margin call, etc., pays for it in full. If that account owner can’t cover it, the broker, then the exchange covers it.
- No naked shorting in stocks. All shorts must borrow stocks first, then short.
- As any entity owns more than 1% of anything, who, what, and when, is disclosed in realtime.
- All employees, officers, affiliates, investment professionals, reporters, etc., disclose trades in real time. There are no very hard to define and enforce “insider trading rules” (the SEC currently offers 90 pages).
- The status of all shares and contracts, are created and independently verifiable via cryptography.
- Cheaters pay 5 times the notional value of the transaction.
-All account contents belong solely to the account holder and are at the discretion of the account holder only. For example, shareholders transparently indicate the interest they charge, say 10% APR, to have their shares borrowed for shorting.
- NO EXCEPTIONS.
A simple recipe for fraudulent markets:
- Have PLENTY of exceptions.
- Take 6 eons to “study” or “investigate, or “test” something nebulous.
- Have 16 trillion rules that only apply to some people, some of the time, depending on unverifiable nebulosity and graft.
- Try to figure out what prices “should” be, with exceptions.
- Make sure a lot of politics and blame are involved — but only blame those who have little political power.
- And never address, nor make amends, nor make changes for something like an alleged crooked judge:
http://marketcuriosity.files.wordpress.com/2010/12/cftc-reality.jpg
or maybe the computer auto trade crashed and real people were bidding 30 percent lower, if so the real market value is far below, flash crash of 2010 might also show us what is really going on.
Obama’s fault
Why should we assume it was an accident? Maybe the word experiment is appropriate???
Since there were so many retailers and institutionals involved in this time frame, how could they bust these trades when someone innocent will also be “punished”? I was in one of these and was suffering until I saw a ceiling, jumped in and retrieved my losses after a $2.50 climb on volume that exceeded normal daily volume in less than half an hour.
I have a feeling there’ll be little more than a fine that won’t come close to what was raped from the markets yesterday.
It’s a good post.