Sunday, November 10, 2013

Chronology of Flash Crashes and Software Glitches Threatening the Stability of Global Markets (Updated 4/9/14)

The computer glitches in global markets continue occurring with frequency. The latest is yesterday's CME Globex outage. Call them flash crashes, technology breakdowns, fat finger trades or software malfunctions, it is all the same, and will likely lead to a mother of all flash crashes at some point forward.

Below is a summary of all the flash crashes and software glitches since the large Flash Crash in May 2010. 26 outages occur in 2013; one every two weeks. Six market outages occur in 2014 thus far maintaining the pace of a flash crash or computer glitch occurring once every couple of weeks--and nothing is done to address the situation. The reason behind the May 2010 Flash Crash remains a mystery. Tread softly moving forward and watch your wallet. High-frequency trading (HFT) is receiving increased interest and scrutiny after the release of Michael Lewis's book Flash Boys and 60 Minutes television show interview where he said, "the markets are rigged." HFT plays a role in many of the events listed below.

5/6/10; Stock Market Flash Crash; the crash begins at 2:42 PM EST with the Dow plummeting about 1000 points (-9%) in minutes but recovering most of the drop by 3:07 PM; $862 billion is lost in minutes; the retail investor is bludgeoned since the stop limits are hit for positions flushing them out at significant losses only to see the stocks to then recover in quick order.

3/23/12; BATS IPO Debacle; results in AAPL circuit-breakers triggering a halt in trading; AAPL resumes trading in quick order but the BATS IPO is cancelled.

5/18/12; FB IPO Disaster; results in a black eye for FB, dubbed FacePlant, and the Nasdaq exchange; traders were not updated on the status of trades resulting in an epic failure.

8/1/12; Knight Capital Trading Glitch; the trading algo’s suffer a technology breakdown spewing out erroneous pricing for about 150 NYSE companies causing a collapse in Knight stock and a loss of 75% of its equity value; the company was sold to Getco forming KCG Holdings.

4/17/13; DAX, CAC, FTSE and Currency Market Mini Flash Crash; Germany leads a mini-flash crash event lower for European markets; the indexes recover in quick order and the collapse is likely due to rumors of credit downgrades pending for European nations.

4/22/13; GOOG Mini Flash Crash; at 9:37 AM EST GOOG price collapses from 796 to 775 (-2.6%) in one second’s time; dark pools are partially to blame.

4/23/13; AP Twitter Whitehouse Hack Attack; a mini flash crash occurs due to a tweet saying an attack has occurred on the Whitehouse; markets quickly recover when the attack is exposed as a hoax.

4/25/13; CBOE Software Glitch; outage occurs prohibiting access to CBOE options on the S&P 500 and VIX; trading resumes in the afternoon resulting in a one-half day outage.

5/1/13; AMT and FMC Mini Flash Crash; price discrepancies cause quick drops and recoveries.

5/17/13; APC Mini Flash Crash; at-the-close orders had to be cancelled.

5/23/13; AEP, NEE and UTIL Utilities Sector Flash Crash; the orders with faulty price levels are not cancelled.

6/6/13; Euronext Exchange Software Glitch; delays the opening of the European indexes for one hour.

7/5/13; NYSE ARCA Computer Glitch; a computer malfunction occurs interrupting the quote system.

8/2/13; CME Treasury Futures Halt; futures stop trading for 5 seconds due to circuit breakers kicking in just before the Jobs Report.

8/6/13; BATS BZX Exchange Glitch; the exchange is not accepting orders due to system issues and Nasdaq routs the orders away from BATS.

8/8/13; USNA Flash Crash; the USNA flash crashes -10% at 1 PM EST and takes down other multi-level marketing stocks HLF and NUS but all quickly recover.

8/16/13; Shanghai Index Market Swing; the Shanghai pops strongly, then drops, intraday, with the biggest market swing in 4 years; Everbright Securities, a State-owned brokerage, is the cause of the error and erratic market behavior due to the proverbial computer glitch once again.

8/20/13; GS Trading Glitch; a GS computer problem occurs at the opening bell involving the routing of options to the exchanges; the problem costs GS about $100 million.

8/22/13; Nasdaq Outage; thousands of stocks stop trading due to a technical problem with Nasdaq securities; the outage begins 12:14 PM EST and ends 3 hours and 11 minutes later at 3:25 PM; about 3200 companies are affected including AAPL, FB, GOOG and MSFT; SEC Chair White calls for a meeting with Wall Street leaders to insure that markets function continuously and orderly; the SIP (Securities Information Processor) feed may have caused the error.

8/25/13; Tel Aviv Flash Crash; a fat finger causes Israel Corporation to plummet 99.9% in five minutes time which sends the TA-25 Index down -2.5% and triggers a shut down; markets recover over the next three hours.

9/4/13; Nasdaq Software Glitch; the Nasdaq experiences another software glitch situation with the SIP feed just like 8/25/13 but the shutdown was only about six minutes; between 11:35 AM and 11:41 AM; NYSE ARCA says the outage was 9 minutes in duration and affected all Tape C (Nasdaq) stocks.

9/13/13; CBOE Options Outage; two CBOE options platforms experience outages but the situation is corrected quickly.

9/16/13; OPRA Outage; U.S. option trading is halted at 1:40 PM EST due to a problem with the Options Price Reporting Agency (OPRA) data feed; a first attempt at restart fails; about 17 minutes later, options begin trading again with minor issues.

10/29/13; Nasdaq Software Glitch; the Nasdaq Composite Index (COMPQ) experiences a glitch at 11:53 AM EST where the index will not update due to a data service feed problem but the individual stocks in the index continue trading; the Nasdaq begins updating again at approximately 12:40 PM; the problem is blamed on human error and involves the Global Index Data Service (GIDS 2.0).

10/30/13; Deutsche Boerse Interruption; data transmission is interrupted at Deutsche Boerse AG (DB1)’s International Securities Exchange.

11/1/13; Nasdaq OMX Group Options Exchange Closure; the options exchange closes at 10:36 AM EST citing technical errors; a significant increase in order entries (probably due to HFT) inhibited the system’s ability to handle the option volume and provide accurate quotes; trading continues on 11 other option trading platforms; the Nasdaq Options Market did not reopen for trading.

11/7/13; OTC Outage; on the day of the TWTR IPO, at 11:25 AM EST, transactions are halted for over-the-counter (OTC) stocks due to a lack of quotation information; the OTC resumes trading 3-1/2 hours later at 3 PM and blames one of its network service providers for the computer glitch.

12/23/13; RUT Small Cap Index Flash Spike; a Flash Spike occurs sending price above 1200, +6%, at the opening bell, then within 15 minutes price collapses -6%. The media does not mention the event.

12/24/13; Copper Error Trade; Copper futures flash spike higher to 3.45, a gain of +4.6% above the opening price at 3.30, due to an ‘error trade’. Price drops about -2.5% and copper closes up +2% on the day. All trades above 3.42 were settled at this level.

12/26/13; AMTD Fat Finger Glitch; AMTD trading pre-market sky-rockets to 130, +330%, from a closing price of 30.44 in the pre-market. The trade is dubbed a ‘fat-finger’ trade and is cancelled.

1/6/14; Gold Trading Suspended; A bulk selling move occurs in gold futures where gold drops from 1247 to 1232 then back up to 1240 in one minute’s time. GLD, the gold ETF, drops from 120 down to 117, -3%, then back up to over 119 in 60 seconds time. The proverbial ‘fat finger’ excuse is blamed for the event. Later in the day the CME labels the event as a ‘velocity logic event’ and says gold trading was suspended for 10 seconds.

1/7/14; NYA Flash Spike and Flash Crash; After the opening bell, the NYA leaps +10.4% higher to 11335 a phenomenal 1065 points. Price immediately collapses in a flash crash dropping -9.0% to 10310, plummeting 1025 points. The drama occurs in two minutes time and is an almost 20% overall move for a major index in only 120 seconds. Wow. An equivalent move, had it occurred in the Dow would have been 1700 points up and down, and the SPX would have been 200 points up and down. More interestingly, the event is swept under the rug and no one pays any attention.

1/10/14; 5-Year Treasury Note Trading Halted; At 8:30 AM EST, less than one second before the Monthly Jobs Report number, the buying activity in the 5-Year Treasury note (likely due to HFT) overwhelmed the price causing a stop logic circuit breaker to trip and shut down trading for 5 seconds. The jobs number was released as the markets were frozen in place. Trading resumes and the event is swept under the rug like the others.

1/10/14; Nasdaq Options Outage; At 11:42 AM EST, Nasdaq options trading for symbols A through M fails. The Nasdaq says the OMX experiences an issue processing the OPRA data. After about 18 minutes the options are back on line at 12 noon. This is the seventh incident in the last 13 trading days.

2/4/14; NYA Flash Crash and Flash Spike; The NYA drops from 9800 to 4, but immediately recovers back to 9800. The quote systems and chart services expunge the erroneous NYA print but no reason is provided for the computer glitch.

4/8/14; CME Globex Outage; At 1:51 PM EST, the CME Globex global electronic trading system experiences a technical glitch and stops trading in several agricultural and grain commodities including hogs, corn and soybeans. Traders experience a mini-panic since about 90% of the commodity trading volume is handled by the electronic system. Contracts impacted are settled in the pits via open out-cry. The CME resolves the computer glitch and plans to be back on line tomorrow ahead of the USDA World Agricultural Supply and Demand Estimates (crop and ag report).

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