Nanex Research

Nanex ~ 26-Jul-2013 ~ Proof that HFT Causes Mini Flash Crashes

Abusing the ISO Order Type

Looking closer at the Whirlpool flash crash (well, flash rally in this case), it becomes clear this type of event is caused by High Frequency Trading. The evidence is overwhelming.

On July 25, 2013 at 14:18:02, the stock of Whirlpool Corp. (symbol WHR, market cap: $10 Billion) suddenly rocketed 5% higher, starting from about $128 and reaching a peak of $134.49 within a second before falling back to normal seconds later. Only about 50,000 shares (395 trades) were involved in this stock that averages over 1 million shares a day (1.8 million shares executed on July 25). 10 exchanges and at least 1 dark pool participated in this event, though prices did not spike as high on several exchanges. Also, during the price spike, there were many quote updates (at least 4 orders placed for every execution), which clearly indicate better prices were available and something is amiss.

NBBO: Dark gray shading
Trades: circles.
Ask prices: downward pointing triangles.
Bid prices: upward pointing triangles.

Bids, Asks, and Trades are color coded by reporting exchange (see legend on each chart).
Follow commentary on 2nd information line:


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