“Volatility On Demand”: Catching A 54 Second Grand Rehearsal For A Market Crash In The Act [Zerohedge]

Tyler Durden's picture

Submitted by Tyler Durden

After uncovering all the dirty HFT-related details surrounding the SEC-complicit misdirection of the May 6, 2010 flash crash, which scapegoated a plain vanilla mutual fund with a report that has been now proven to be fatally flawed, and likely fabricated on purpose, the market forensics at Nanex have now uncovered something even more disturbing. As a reminder, some time ago, Nanex discovered that there is a direct and simple way for HFT-based operators to create latency on demand: the very same phenomenon that facilitated the flash crash once it had started, and prevented normal price discovery. Now it is time to add Volatility on demand: a precondition that may well be critical to setting up the next May 6-like market wide flash crash. Because according to the following analysis, yesterday at market close Nanex may have observed a grand dress rehearsal for the next programmed market wide crash.

To wit: “Either someone likes buying high and selling low, or they have figured out how to significantly increase the volatility in a stock.” For those who still trade stocks and want this translated into English, here it is: “On May 2, 2012 beginning right at market close (16:00 Eastern) and continuing for about 54 seconds, an HFT algo ran that significantly increased volatility and impacted at least 34 stocksWe think this was either a test of an algorithm someone is getting ready to deploy during market hours, or that this algo already runs during market hours, but is much harder to detect amidst the huge volume of market data noise.”

Did Nanex just catch a 54 second-long dress rehearsal prepping for the next produced market crash? Read and decide.

From Nanex:

Volatility On Demand

Either someone likes buying high and selling low, or they have figured out how to significantly increase the volatility in a stock.


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