What if this was tactical. They knew they'd get cancellations, perhaps they traded on the equities in the same direction as the "errors". And equity trades aren't as easily reversed. Far fetched but remember, this is Goldman.
The market returns to the fat finger and phantom print level. Look at April 23 low on twitter hack, should be going back there once again.
Unlikely as there will still be a lot of pain. They probably lost millions and unlike the flash crash it's doubtful that the stocks would move enough to help with the delta hedge. They are sitting on a lot of inventory that they probably don't want.
http://www.bloomberg.com/news/2013-...ows-peril-persists-one-year-after-knight.html http://community.livevol.com/index....-did-goldman-make-erroneous-trades-again-r230
The spx trades this am had to do with the vix settlement. This borderlines on market manipulation if you ask me.
I haven't looked at the trades themselves (the GS debacle) , but supposedly there were a bunch of $1 prints that should have been much higher? How did they even execute, how did they clear out the better prices on the book? And if they were clearly bad prices, then the busts are standard proc. Nothing to do with it being Goldman. If you somehow sell a $30 option at $1, do you think you have to eat it?
How do you clear a book and get the fills at $1? I'm not saying this is what happened in this case as I don't know but it seems logical as I've seen this happen regularly over the years - albeit on a much smaller scale. Let's assume the case where a market maker recognizes the $1 is a bad price and normally wouldn't lift the offer knowing it would be busted: 1. Large size order with an offer of $1 takes out the book (assume fair value ~$5); 2. multiple fills take place from $5 all the way down the book; 2. Market makers get filled at prices on the screen immediately resend orders with a fair bid of $5; 3. However, the offer is already $1 and hence the fills. Note: this all happens in milli and micro seconds. orders might be resent to the exchange before the datafeed or clearing book at the exchange reflects the new offer at $1. - My suggestion - which will happen in my dreams. Exchanges create a clearly defined bust policy and calculate a fair price and disseminate this to members. From this price, brokers and market makers can calculate the bust range and not allow orders outside of this range. At the same time, exchanges could do the same by preventing orders outside of this (wide) band. A pipe dream but it should would reduce these errors and lower regulatory costs across the board.
Insider trading, so old school. Does the SEC get the code now, to analyse what the software was using to calculate the orders. Who knows if and where this "glitch" made them money until you know the code. Man, what must it be like to be on the inside at GS? Rivers of gold, government backed.