$45 Billion in Less Than 1 Second

Today we should all be cheering.  The Dow closed up 121 points — a new (yawn) record high.  But all is not well in stock-land.

Pity poor Anadarko Petroleum Corporation (APC).

At 3:59:59:10 p.m. this afternoon, APC was worth $45 billion.  50 milliseconds later, the company was worthless.  As evidence, I present the following chart courtesy of Bloomberg:

Image

The area circled in red shows the value of APC dropping from over $90/share to $0/share in 50 milliseconds.

Neat trick.

We may laud the great bull market of 2013, cheer the daily all-time highs, and toast the 120% gains achieved since the market’s nadir in 2009.  But when you sweep away all the celebratory confetti, you see a system that is extremely vulnerable.  This flash crash was not in some $2 stock with 32, 000 shares trading each day.  It was Anadarko-freaking-Petroleum — a stock with an average daily volume of nearly 4 million shares.

But, no worries.  I was just notified by DECS that all trades below $87.56 “will be busted.  This decision cannot be appealed.”

Hey!  Why fix the system when you can simply bust trades that occur because your system is a joke.

Speaking of jokes…  Two HFT algorithms walk into a bar…

-LL

images