I'm sure everyone knows what happened to Rambus on Monday, and i know there are a lot of opinions. What everyone can agree on is the move cost a lot of people a lot of money. I read one theory that has spread throughout the blogsphere that i haven't seen on ET yet. If this has already been posted somewhere, then my apologies for re-posting. Dennis Dick of Bright Trading thinks it is High Frequency Trading market making gone bad. He suggests this could foreshadow something bigger to come - a marketwide crash perhaps. The article is a bit lengthly and would probably take up an entire ET page, so i will just post the direct link for those interested in reading further. http://www.defendtrading.com/rambusincident.html
The account of what happened seems to be just an opinion and not supported by evidence. Blaming computers for anything that goes wrong has always been popular ploy but it is more likely someone panicked and fat fingered the stock. It looks like a classic fat finger spike. I think the problem is that there are still too many humans in the market. We need to move towards 100% computer trading to improve risk control.
RMBS is knee-deep in patent infringement lawsuits with Micron, Hynix, and others. On Monday the judge made some comment about the case (you'll have to look it up I'm too lazy) that moved the stock big time. You gotta know what is going on with the stocks you are involved in.
I don't know what you're saying, if you want to understand how to trade, you must understand how these computers act because they are the market. You can't simply dismiss them, and I believe the article is a very good one.
there's nothing wrong with the post, but hft is not just pennying, its many things. quite a few trades go off at the even penny.
I am not nearly as convinced as the gentleman from Bright that is was strictly algo based. I think these algo's have ruined the marketplace for a lot of us don't get me wrong. Not just daytraders, anyone trying to get an order off in the marketplace. There have always been 'participate' orders. However, what we see with all the algo's trading against each other is driving the average investor and trader nuts. At any given time in a stock, there may be 5-10+ vwap, over the course of the day or shorter, buyers and sellers. These orders need to participate with volume. Then you have algo's that look for strength or weakness in a stock. Supposedly, you also have dark pools that see the orders when we cannot. So what does all this mean? A stock like CAT or even AAPL, trades millions of shares a day. When you put in a bid, it really has to be for sale for you to get hit. It is very difficult to add liquidity when you have computers that are going to do everything they can to buy stock in front of you. If the offer shows 3000 and you try to take it, you may clear out one ecn and get 700, and the algo's take the rest and bid it up because now they need to participate with volume. When they have satisfied their immediate participation, they back off and the stock comes right back in. Sound familiar to anyone? When I have orders in for something I am trying to sell, I show 500 for display, but I have many more in the order. So if I have 4 orders in, everyone should only see 2000 for sale up a 5-8 cents lets say. If I choose to cancel, there is an almost immediate reaction and a move right thru all my price points. Are these algo's really only seeing 2000, or do they see the whole 20,000 I am trying to sell? I am convinced its the latter. I put in 1000 AAPL to buy at say .46 - it trades up to .93, then all the way back to .46 bid. It trades at .47 even though there shows no bid, never hits me, then right back up. For a stock like that it drives me insane that 10,000,000 can trade on any given day and 1000 shares can set the lower range for several minutes, often I never get hit and it goes higher after having it show my miniscule little bid 5-6 times. Anyone else see this, or am I going insane? Back to the OP. We have seen stocks that have moved like Rambus in the past. The e-minis did it once. A trader went to put in $1,000,000 dollars worth and he accidently put in 1,000,000 for sale at the market. I think too many market orders in one name with news and a fat finger might very well have been the cause. NASD Market Surveilance would not have declared them erroneous trades after investigating unless they were clearly just that. If the algo's traded with each other in earnest down there, those are not erroneous trades. Roll Tide!