September 29, 2008
The Other Flash Crash
| The Other Flash Crash
No, not the
May 6th event, the one on September
29, 2008, when the Dow Jones Industrials fell 500 points in about 4 minutes, only
to recover 5 minutes later.
This time, the fall was likely caused from traders betting that the House vote on
fail, which it did at 14:07.
There are a few similarities to the May 6th event. One is quote
feed saturation which overloaded systems. On September 29, Nasdaq's quote became delayed, just
NYSE's was on May 6th. Except in
this case, Nasdaq's quote was delayed by minutes, and eventually quotes stopped coming altogether from Nasdaq.
But that didn't seem to affect trading at Nasdaq. Though, based on trade reports it
did confuse other exchanges and internalizers. There
were also a number of stocks that hit
stub quotes which began after the market found
a bottom and was rallying back up.
We are pretty sure Waddell &
didn't cause this crash either.
For reference, here is a one second interval chart of SPY on May 6th, 2010 showing the trades from all reporting exchanges which are color coded according to the legend at the bottom left of the chart. Note the
delay (offset) in the green dots, which are from dark pools or internalizers. The
gold or yellow dots are from NSX, previously known as Cincinnati.
| The following are all one second interval
charts from September 29, 2008.
SPY showing the NBBO (red shading shows where it was
crossed). The black is Nasdaq's severely delayed and crossed quote.
SPY with Nasdaq Trades (black circles) and Quotes (black shading).
SPY showing trades from all reporting exchanges. The green dots
are mostly from dark pools (internalizers). ARCA trades track both the delayed Nasdaq
quote and the real one.
The following are all one second interval charts on September 29, 2008 showing quotes from all reporting exchanges. Confusion reigns.
SPY ~ SPDR S&P500
SDS ~ ProShares UltraShort S&P500
DIA ~ SPDR Dow Jones Industrial Average ETF
DXD ~ Proshares Ultra Short Dow Jones Industrial Average ETF
IWM ~ iShares Russell 2000
QQQQ ~ Powershares
AAPL ~ Apple Computer
C ~ Citigroup
DIS ~ Disney
JNJ ~ Johnson & Johnson
MA ~ Mastercard
MER ~ Merrill Lynch
PEP ~ Pepsi
QCOM ~ Qualcomm
RIO ~ Rio Tinto Plc
USO ~ United States Oil Fund
WMT ~ Walmart
GS ~ Goldman Sachs
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Publication Date: 02/10/2012
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