
The problem with the sell off is no one can tell us what happened - thafman
http://whydoeseverythingsuck.com/2010/05/problem-with-sell-off-is-no-one-can.html
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secretasiandan
"Amazingly, as stocks were diving downward, willing buyers were locked out of
purchasing"

This is Just Plain Wrong. The post offers no evidence for this. For my
evidence I'll use the fact that trades were occurring at almost all price
levels, which is why some had to be canceled. For the stocks that "went to 0",
that in fact means there were no willing buyers for anything other than $.01
(I doubt any trades actually occurred at 0)

"There has to be some explanation, and I can't imagine why it would take days,
or even hours to figure out how a $50 stock could get to a price of $0 with no
one able to purchase as that price is dropping"

Yes, the answer is that when a deal looks too good to be true, you check it
out for at least another second (or perhaps 10 minutes, the duration of the
"flash crash") before you put millions to billions of dollars of money into
something. Again, I reject the idea that no one was able to purchase at any
point.

~~~
yummyfajitas
I think what he is referring to is that ARCA (NYSE's sucky exchange) stopped
routing buy orders in an effort to boost prices locally. So if you placed a
buy order on ARCA, and it could be filled on BATS, it was not routed to BATS
and remained unfilled (this is what normally occurrs).

[http://www.washingtonpost.com/wp-
dyn/content/article/2010/05...](http://www.washingtonpost.com/wp-
dyn/content/article/2010/05/10/AR2010051003644.html)

~~~
secretasiandan
I think you're referring to the following quote : "As part of that process,
the NYSE held on to "buy" orders, in the hopes that it could gather enough of
them to meet the selling demand. "Sell" orders that came to the NYSE were
rerouted to other exchanges, which were not required to slow trading. Those
other exchanges were soon overflowing with sell orders and didn't have enough
buy orders to meet them, leading to the rapid decline in prices."

I've spoken to a recently retired HF trader about it to verify that it seems
wrong and he says that the way that quote is written it doesn't make sense.

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wdewind
I don't think this guy really understands the issues at hand. I'm pretty sure
we know EXACTLY what happened, just not WHY. Which is exactly why his "10,000
foot view" is completely useless.

~~~
lallysingh
Yeah, let's go to every firm and ask them their trading strategies. I'm sure
they're happy to share.

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grhino
I think the author underestimates the problem of finding an explanation out of
the mess of data that's available. It's possible there could never be a simple
explanation of what caused the sell-off. It could just be that 1) we need more
measures in place to reduce this kind of volatility, 2) we need less
protective measures and let market corrections happen on their own, or 3)
accept that this can happen and handle the next event the same way this one
was handled.

I've read some articles suggesting that the drop was more dramatic because
automated trading systems were taken offline. I've read that the drop was more
dramatic because some stocks are sold on multiple markets with different
emergency stop conditions.

~~~
secretasiandan
I second the notion that making sense of the data is extremely complicated
(assuming that your answer is not just "there were more sellers than buyers").

First, the amount of data is extremely large. See the BATS connectivity
manual, page 8. They require a MINIMUM connectivity speed of 1Gbps PER FEED.
Page 9 shows that the peak rates are higher than this. Note that this is only
one exchange of many.
[http://batstrading.com/resources/membership/BATS_Connectivit...](http://batstrading.com/resources/membership/BATS_Connectivity_Manual.pdf)

Second, even if you could make sense of all the data, there's people on the
outside creating the data. A full model of what happened would require knowing
what is going through their minds.

