Edition: Global Global Select Region
Email: Passwd: or sign up free
One News Page
One News Page > Markets > How To Shut Down Retail Trading
Open news article

How To Shut Down Retail Trading

Zero Hedge
Wednesday, 9 January 2013

Via Nanex,

On January 8, 2013 there were *two separate events where an exchange stopped disseminating quotes*, which caused the last quote sent from that exchange to lock (bid price equals ask price) or cross (bid price is greater than ask price) the NBBO (National Best Bid/Offer) when market prices moved higher or lower on other exchanges. *Crossed quotes* cause many problems for wholesalers (who internally match orders), order-routers, traders, financial web-sites, business news channels, and any of the 2.5 million subscribers that use the consolidated quote to analyze stock prices. From IWM to HLF, the crosses (and thus integrity of the consolidated feed) were everywhere.

*Market Stability*

In August 2012, we made a fascinating discovery: *whenever the NBBO crosses in a stock, several dark pools will stop reporting trades and wholesalers (internalizers) will stop matching customer orders* (you can read that paper here). Because the SEC looked at flash crash data with mostly 1 minute snap-shot data, they concluded and wrote in the final flash crash report that internalizers stop matching retail customer orders when stocks have large price moves. But this is untrue. Internalizers only stop matching customer orders when the NBBO crosses in a stock. *Which makes the integrity of the consolidated quote extremely important in maintaining market stability.*

*NYSE Outage*

The first event began at 14:10:30, when NYSE's quote stopped updating in symbols within the alphabetic range SJ through TCZ. Within 31 seconds (14:11:01) the NBBOs of 35 of these stocks began to lock and cross as prices moved away from NYSE's stale bid or offer. NYSE finally cleared their quote at 14:19:29 which removed their last posted bid and offer from consideration as the NBBO: this had the effect of unlocking/uncrossing NBBOs in those stocks, allowing the market to resume normal trading. NYSE began quoting and trading in these stocks at 15:05:33.

*NSX Outage*

The second event began at 14:43:10, when NSX's (also known as the CINC exchange) quote stopped updating in symbols within the alphabetic range HD through ITUB. Within 2 minutes (14:45:03) the NBBOs of 48 of these stocks started to lock and cross. Off and on over the next 45 minutes, NSX sporadically updated quotes and trades and some symbols had a crossed NBBO from a stake NSX quote until 15:28:12.

The examples below provide *more evidence that crossed quotes have a definite impact on trading at Dark Pools and order matching at Wholesalers* (who internalize orders from E*Trade, Ameritrade and other retail brokers).



Trades from the NYSE for affected trades... note the total darkness for multiple seconds...


and everyone's favorite - HLF! - Herbalife (HLF) showing trades color coded by exchange and NBBO (*Shaded Red if Crossed - Best Bid > Best Ask*)


and even iShares Russell 2000 (IWM) showing trades color coded by exchange and NBBO (Shaded Red if Crossed - Best Bid > Best Ask).


Both of which are ripping recently... broken markets everywhere
Share on FacebookShare on Twitter Comment

You Might Like

Other recent news in Markets

Bank of America reports unexpected first-quarter lossPeople's UNITED Financial Reports First Quarter Operating Earnings Of $0.19 Per Share And Net Income Of $0.18 Per Share; Announces Dividend Increase
It’s Official: AMERICA is an Oligarchy and NOT a Democracy or a RepublicUS Stock Futures Surge Ahead Of BEIGE BOOK, Bank of America Earnings
Bang & Olufsen launches next-generation RETAIL concept in North AmericaFTSE LIVE: GOOGLE and IBM updates stoke fears about tech sector
Google Profits Are Up, But Too Slowly For WALL STREETMayor Coleman, Moms, Gun Violence Survivors, And Faith Leaders Gather To Launch New Group That Unites Moms, Mayors And Millions Of Americans To End Gun Violence: 'Everytown For GUN SAFETY'
MARKET REPORT: INSURANCE company Lancashire can rely on track recordGENTING SINGAPORE PLC: Financial Statements and Related Announcement



comments powered by Disqus

Environmentally friendly: One News Page is hosted on servers powered solely by renewable energy
© 2014 One News Page Ltd. All Rights Reserved.  |  About us  |  Press Room  |  Terms & Conditions  |  Privacy Policy  |  Content Accreditation
One News Page - Top Headlines RSS Feed RSS  |  News for my Website  |  Free news search widget  |  Advertise  |  Help  |  Contact us  |  DMCA / Content Removal
How are we doing? Send us your feedback  |  One News Page on Facebook LIKE us on Facebook  One News Page on Twitter FOLLOW us on Twitter  One News Page on Google+ FIND us on Google+

Bullet: One News Page official news app for iPhone Bullet: Our news app for iPhone