
Trading in Stocks, ETFs Was Halted More Than 1,200 Times Early Monday - brbcoding
http://www.wsj.com/articles/trading-in-stocks-etfs-paused-more-than-1-200-times-early-monday-1440438173
======
bluedevil2k
Look at the ETF RSP yesterday. It's pretty much an S&P 500 index fund. When
the S&P was down about 5% in the morning, RSP was down up to 40%. Didn't make
any sense. Trading was getting halted every few minutes and buy orders were
going unfilled.

[http://finance.yahoo.com/echarts?s=RSP+Interactive#{%22range...](http://finance.yahoo.com/echarts?s=RSP+Interactive#{%22range%22:%221d%22,%22allowChartStacking%22:true})

~~~
jackgavigan
An ETF like RSP won't always track the underlying index value exactly,
especially in fast-moving markets.

Units of an ETF are just like any other share - an imbalance of sellers over
buyers will drive the price down. In an orderly market, that usually isn't a
problem - market makers will typically be there ready to absorb market orders
and smooth out temporary imbalances, and "authorised participants" can
create/redeem units/shares in the ETF if the market price starts to deviate
from the NAV (net asset value - the market value of the underlying assets in
the fund).

In a situation like we had yesterday morning, it's likely that market makers
and authorised participants were staying out the market because it was moving
too fast for them. In that sort of situation, if panic-sellers or forced
sellers (e.g. due to margin calls) are placing market orders, an order book
imbalance could easily develop, temporarily driving the price down to an
unreasonable level before the market stabilises.

Sudden drops trigger trading halts, where trading is suspended for ~5 minutes.
Trading in RSP was halted ten times between 9:30 and 10:30am yesterday - it
didn't actually trade continuously for more than 34 seconds during that time
(you can see this on the chart you linked to - there are only 11 points in the
big V on the chart, then it reverts back to one point every minute from 10:30
onwards.

The same sort of thing happened during the Flash Crash in 2010.

------
jvm
Throughout this thread, commenters are assuming that circuit breakers are
helpful and useful. Yet no evidence in favor of that assumption is presented
in the WSJ article. The CNN article quotes someone named "Dennis Dick"
claiming they are useful without providing evidence.

Under economic theory, interference in markets prevents them from correcting
prices and is therefore never a good thing. Certainly Milton Friedman [1]
thought they were harmful rather than helpful.

Is anybody interested in sharing positive evidence that they are helpful?
Helpful is presumably defined to mean they help prices stay as accurate as
possible.

[1] [https://books.google.com/books?id=5NQvv_Z-
zKcC&pg=PA151&lpg=...](https://books.google.com/books?id=5NQvv_Z-
zKcC&pg=PA151&lpg=PA151&dq=milton+friedman+on+circuit+breakers&source=bl&ots=4aqiH3-Hq4&sig=jpXqaDLdflv76iDbD73rZ4eBSUQ&hl=en&sa=X&ved=0CB8Q6AEwAGoVChMI8NrdzNDExwIVRZ6ACh1F9QGX#v=onepage&q=milton%20friedman%20on%20circuit%20breakers&f=false)

~~~
stouset
Your definition is inherently skewed. After all, what is an "accurate" price
other than what the market is trading? Furthermore, why is an accurate price
the overall goal? Perhaps other goals are more worthy, and would come at the
expense of accuracy.

------
hartator
[https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&c...](https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CCAQqQIwAGoVChMIlvbAgPTDxwIVxjQ-
Ch15AwDk&url=http%3A%2F%2Fwww.wsj.com%2Farticles%2Ftrading-in-stocks-etfs-
paused-more-than-1-200-times-early-monday-1440438173&ei=czPcVdbwCsbp-
AH5hoCgDg&usg=AFQjCNG-2rSF-n3uw7Xub6HFLXJjpDN08g)

~~~
a3n
For quite some time, the google workaround just brings me to the same
truncated WSJ article, with an invite to subscribe or log in. The above link
fails to get me in as well.

Is this working for some, but not for others? I've assumed that WSJ has just
turned this method of entry off.

~~~
asib
There's a neat Chrome plugin that was posted on HN a while ago called Wait,
Google Sent Me
([https://news.ycombinator.com/item?id=9531941](https://news.ycombinator.com/item?id=9531941)).

If you go to the article and then click the plugin's icon in Chrome, it shows
you the whole article.

~~~
joshstrange
I use this but it is no longer in the chrome store. I found this bookmarklet
that is supposed to do the same thing:

    
    
        javascript:location.href%3D%27https://www.google.com/webhp%3F%23q%3D%27%20%2B%20encodeURIComponent(location.href)%20%2B%20%27%26btnI%3DI%27
    

YMMV

------
a3n
[https://duckduckgo.com/?t=lm&q=Trading+in+Stocks%2C+ETFs+Was...](https://duckduckgo.com/?t=lm&q=Trading+in+Stocks%2C+ETFs+Was+Halted+More+Than+1%2C200+Times+Early+Monday)

[http://money.cnn.com/2015/08/24/investing/stocks-markets-
sel...](http://money.cnn.com/2015/08/24/investing/stocks-markets-selloff-
circuit-breakers-1200-times/index.html)

------
kaneplusplus
[http://www.barrons.com/articles/SB50001424052702304718904576...](http://www.barrons.com/articles/SB50001424052702304718904576486604254916420)

------
randomname2
Yesterday was similar to the flash crash of 2010, except this time liquidity
was much worse throughout the entire day, with a paralyzed market which was
the direct result of countless distributed, isolated mini flash events, all of
which precipitated the market's failure for the first 30 minutes of trading,
illustrated by these stunning charts from Nanex:
[https://twitter.com/nanexllc](https://twitter.com/nanexllc)

Of note in the WSJ article is the passage noting the extreme discrepancy in
EFT prices and fair value as hedge funds sold off ETFs and market makers such
as high speed traders and Wall Street firms refused to step in.

~~~
lrm242
We did 13 billion shares yesterday, which is nearly 2x the 10 day average. The
market was far from broken. In fact, I'd say it performed remarkably well.

~~~
gchokov
Finally some common sense. +1

------
grecy
I find it amusing that when the market is rapidly going up, everything is left
alone. But when it's rapidly going down, or sporadically doing so, they halt
trading and turn everything off for a while.

Does anyone else not see this as a clear sign the entire setup is broken and
bogus? It's all a big joke.

~~~
thesimpsons1022
what are you talking about? did you even read the article? it clearly says
that anytime a stock goes UP OR DOWN 5 pct they halt trading on it for 5
minutes.

------
lucaspottersky
loved the paywall

------
phelm
The need for these 'circuit breakers' really highlights the fact that Laissez-
faire economic systems are in no way capable of keeping themselves stable.

~~~
miscellaneous
>Laissez-faire economic systems are in no way capable of keeping themselves
stable.

This is the point - Laissez-faire economic systems function well on their own,
it just happens that humans prefer systems that are "stable". Hence,
regulators try to limit the volatility of markets meet their stability
preferences. Whether this is ultimately beneficial is an ongoing debate.

I would point out that in many cases enforcing artificial stability on markets
can have negative outcomes. Recently, the +/-10% limits on daily stock price
movements in China created situations where many stocks increased by 10% every
day for over 100 days [0]. Such illusions of stability likely played a role in
the recent bubble/crash in China. It could be said that attempts to regulate
'stability' into markets merely leads to a masking of tail risk, which can be
very dangerous.

[0]
[https://news.ycombinator.com/item?id=9471858](https://news.ycombinator.com/item?id=9471858)

~~~
ild
Markets cease to exist in unstable environment; "artificial" or not, stability
is a precondition for existence of any social institution;I mean, come on, who
wants to participate in unstable market?

~~~
jerf
If the underlying thing is unstable, a market sitting on top of it will be
unstable. If you try to force the market sitting on top to be stable by fancy
jiggery-pokery, you've forcibly created a market that is no longer connected
to what is below it, which now has all sorts of those arbitrage opportunities
for the connected that people love to hate, and also dangerously hides further
instability where you can't see it, because in a way it's conserved whether
you like it or not.

You may want stability. You may even _need_ stability. But neither of those
two things means you get to have it. The universe and the world is
fundamentally unstable.

You can look at what is happening in China right now in that way. They've
forcibly created stability and reliability. Awesome, right? This worked great,
until the absolutely and utterly inevitable black swan event occurred (to the
point I have a hard time even calling it a black swan, since it was so
predictable) because the conserved instability, instead of getting expressed
in little ways on a day by day basis, is getting expressed as one big event.

Just because you fully dammed the river doesn't mean you've stopped the river
from flowing, and it's time to build a dance platform in the middle of the old
river bed and invite everyone to party all night long. It means you better run
away from the entire river bed and everything even remotely near it before the
dam catastrophically bursts and destroys everything.

You're looking not at a demonstration of why it's important to artificially
stabilize markets... you're looking right at _the consequences of doing so_.

(In fact, the way that people then interpret the destruction of everything as
a consequence of the dam just not being strong enough and we need to put
politicians into power that will create an even BIGGER dam is an important
element of understanding the ratchet of tyranny, and how what happened to the
Soviet Union and Venezuela happened. It wasn't bad luck... it was
misinterpreting overcontrol as too little control, and "correcting" in exactly
the wrong direction. The failure of today becomes the excuse to grab yet
_more_ power, stomping on anyone in the way who objects, and grabbing
centralized control _even harder_ , which creates an even _bigger_ disaster
which requires even _more_ centralized control... repeat until the society is
too weak to even maintain a government anymore. And remember, if your
comfortable Western-raised brain is objecting that this can't happen, it has
happened, in this decade, to real countries that you can find on a globe. It
is not a thing of myth and it is not even a thing of the _past_. It is a path
we humans seem congenitally prone to.)

~~~
ild
Underlying markets _are never stable_. The main stabilizing force in the world
are institutions of power and violence, such as army (especially American),
police, jails etc. Markets already rely heavily on governments for their
existence. You got Black Swan completely wrong, if you think that Taleb is
advocating for laissez-faire, he is actually big fan of slow and dull, tightly
controlled systems ("antifragile").

~~~
miscellaneous
> He [Nassim] is actually big fan of slow and dull, tightly controlled systems
> ("antifragile")

Please watch the first 5 mins of this interview (or all of it) with him:
[https://www.youtube.com/watch?v=ehXxoUH1AlM](https://www.youtube.com/watch?v=ehXxoUH1AlM)

"Antifragile systems like volatility"

He is literally advocating the opposite of what you said. Governments are
centralized and fragile (don't like volatility) hence their propensity to
regulate volatility. He directly blames (large) government for the GFC - see
4:40 in the video.

~~~
ild
> (don't like volatility)

Antifragility is not liking volatility; it is dislike but acceptance of it.

This is what he said:

“(4) Build in redundancy and overcompensation

“Redundancy in systems is a key to antifragility. As Taleb suggests, nature
loves to over-insure itself, whether in the case of providing each of us with
two kidneys or excess capacity in our neural system or arterial apparatus.
Overcompensation is a form of redundancy and it can help systems to
opportunistically respond to unanticipated events. What seems like
inefficiency or wasted resources like extra cash in the bank or stockpiles of
food can actually prove to be enormously helpful, not just to survive
unexpected stress, but to provide the resources required to address windows of
opportunity that often arise in times of turmoil. This perspective helps to
put into context the praise of inefficiency in Bill Janeway’s important new
book, Doing Capitalism in the Innovation Economy."

Well, to build in redundancy you need market manipulation (FDIC for example),
otherwise markets will tend to overfitness. If you are claiming that
"antifragility" = laissez-faire you are completely wrong; who will enforce the
redundancy?

~~~
miscellaneous
> who will enforce the redundancy?

Who enforced the redundancy of humans possessing two kidneys? If you are a
creationist, then I guess we have different starting assumptions.

Assuming that you aren't, then you would understand that redundancy in humans
literally evolved from randomness and volatility. Evolution is a hill climbing
algorithm - the organisms that survive the best reproduce more and become more
prevalent. For me, nature is perfectly laissez-faire, there are no circuit
breakers in nature, there is no enforced stability.

