Table Of Contents
| On September 29, 2011, beginning at 14:08:25, quote rates from one stock, AMD,
accounted for nearly half of all equity quotes. The pattern of data is similar to what
we found in Dell a month earlier. There were 6 seconds that each had over 20,000
We are having trouble finding the appropriate superlative to describe the level of
lunacy that generated this event, and the incompetence of regulators to allow it to
continue. And continue it does: both in frequency and magnitude. Soon 20,000 quotes/second
per stock will be the new normal.
This problem will only continue to grow until one day, when there is real market impacting
news, there simply won't be enough bandwidth or computing power to process legitimate
equity prices. And everyone will wonder what happened. The last time that occurred
was May 6, 2010.
To this day, regulators
still believe stub quotes and Liquidity Replenishment Points were a cause of
the flash crash, when anyone who actually looks at the data will find that nearly
all of the
stub quotes and
LRP's didn't occur until after the market bottomed. Regulators continue to
cling to the
myth that Waddell and Reed's trade was major cause of the event, when
again, anyone who
actually looks at the data will find that the bulk of the sell order was executed
after the market bottomed.
And what is inexcusable, is that the regulators didn't even bother to interview the
traders that ran the algorithm used by Waddell and Reed
until two weeks after they published their
report! Maybe it was because
it took them 5 months just to assemble the data, and they ran out of time
for any serious analysis. Too bad if that is the case, because the next time we have
a serious market event, they will be facing at least 4 times as much data that overwhelmed
AMD - ADVANCED MICRO DEVICES, Price and Sizes for 2 second period of 14:08:29, 14:08:30
Zoom in of previous chart showing the sequence:
The impact on CQS Line # 1 (Red). AMD quotes make up the majority of quotes on that
line. Chart shows quotes/second on a 1 second interval.
Zoom in of previous chart showing quote traffic rates on a 50 ms interval.
Publication Date: 09/30/2011
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