All happened within less than 900ms, so it cannot be a fat finger. I'd say it either a well engineered & timed cross, or an algo went wild, and another algo took advantage of it knowing it would push the market higher by the EOD anyway. As you see from the tape, size offer was actually stepping down to 1137, then it was taken out, and finally 70k appeared on the bid... Which almost looks like an attempt to cover the loss... Or happy algo on buy side was saying 'Gimme more!!!'
Okay so someone bought AND sold 200K ES at 37.25 and 37.5. First off, how is it possible for someone to do this 'inadvertantly'. The answer of course is that is not possible. My theory is this was just a huge instance of manipulating the market upwards. Trading with yourself is probably the worst rule break you can do according to the CME. They told me that they have machines in place to stop this which is obviously more CME bullcrapp. I imagine people would've been going short below the size and when the size was taken out it would've stopped them out whilst also giving the impression there was a HUGE buyer ie huge market manipulation. As for what punishment this entity will receive for this I can assure you that it will be none. NADA. Nothing at all. If you've got a 200K limit you've got to be something extraordinary. I can assure you that GS don't trade anywhere near 200K and indeed rarely do more than a few thousand. It is clear in the rules 20K is the e-mini limit. There are no exceptions. If you have a bigger open position than that then they will be up your ass quicker than you know it. Not that I'd know clipping 10's lol. It's clear the CME protects individuals and a guy/company with 200K limit, well that's a whole different level of trader. I mean the CME bends over backwards for Igor and he hasn't even got a 10K limit?!?!?
Personally, I don't think its manipulation, just an algo screw up. And since it was one firm trading with itself there's no reason the position limits were broken. No doubt the CME has got some basic checks in place to stop a firm trading with itself, but clearly they're not fool proof! I agree that the punishment for the firm involved will be minimal. CME will keep this quiet. I'd like to know which firm was involved...
From Zerohedge http://www.zerohedge.com/article/fed-finger-more-observations-esh0-incident The Fed Finger: More Observations On The ESH0 Incident Submitted by Tyler Durden on 01/13/2010 22:18 -0500 High Frequency TradingNASDAQnotional value Fidel Sarcastro submits: What happened at 12:03pm Eastern Time? There were no reports out, the 10-YR Note auction wasnât until 12pm, and the S&P500 was a bit stonewalled just under 1137.00 after a rally from the dayâs low. As the market advanced slowly through the congestion it hit: a MASSIVE order, or series of orders, lifted the offer in the e-minis. But it wasnât your garden variety large order of 2,000 miniâs â Iâm talking about 114 times that size. At 11:03am today at the Chicago Board of Trade (12:03pm EST) over a quarter of a million mini-S&P500 orders traded north of 1137.00! (228,000 last count) I looked at the attached chart in disbelief. Could this be real I wondered? Was it some sort of computer malfunction that added too many zeros to the reported, yet smaller, trades? No, thatâs not what happened. In fact, a bit of a hullabaloo occurred around my trading booth on the floor of the CBOT as many locals, brokers, and compliance members stared at the aforementioned volume chart in disbelief. As it turns out, all of the trades were indeed valid. None were busted. Moreover, as one of the compliance members told me, he saw the trades listed sequentially (1,000 or 2,000 lot orders) and they all occurred with milliseconds of one another until the massive order was completed. This order size takes a SERIOUS bankroll to get done. If you are wrong by one-point on a 228,000 lot ES order, you can say goodbye to $11,400,000.00. If you contemplate this size your margin requirement is $1,282,500,000.00, while the notional value is $12,961,800,000.00. Has a new âplayhaâ hit the scene? Is his nickname âHelicopter?â Has high frequency trading (HFT) taken root in the mini-S&P in a huge way? In the end it may turn out to have been a âcross trade,â where one institutional firm prearranges a large order with another to clear it in an orderly fashion. As of now I donât have a firm answer, but whether it was HFT activity, the âHelicopter,â or a massive cross trade, it sure set the bottom in for the afternoon. Everyone in the Dow, Nasdaq, and S&P pits were talking about it and nobody was willing to sell into that massive bid.