You Cannot Force People To Make Markets

At the risk of beating a dead horse, I want to come back to an essential point that is necessary to remember in any discussion of market structure reform.  This morning I praised Floyd Norris for an interesting article about how MBIA's loss expectations have evolved.  Tonight I give him a thumbs down for his analysis of "liquidity providers" versus "market makers."  Norris writes:

"I have heard people from Wall Street say that it is unreasonable to require market makers to make markets rather than simply post “stub bids” of one cent when they do not want to take part.  One even suggested that the solution was to bar retail investors from placing orders to sell at the market price, lest such orders hit a market unwilling or unable to handle them at reasonable prices.  Such an order should have a 3 percent range of allowed prices, so that the order would not be executed at an unreasonably low price, it was said.

Give me a break.

 

This could never have happened a decade or two ago. Then markets had market makers, who were required to maintain bid and ask prices.  There were primary markets that set prices.  Prices could plunge — see 1987 — but not like they can now without anything really happening other than a breakdown of Wall Street systems."

Since I've addressed these topics at length previously on this blog, I'll just copy&paste the comment I left on Norris's post, and refer you to my prior writing on the subject:

"Floyd - the point of preventing market orders is to protect unsophisticated retail investors who don't understand what "market" means. I'm all in favor of it, because I would guess that 99% of the time a retail investor sends a "market" order they don't really mean "market" - they assume that they will be filled near the current price, which is a faulty assumption.

As for other possible solutions: you can't force market makers to step in front of a falling market. It's impossible. It doesn't matter what you call them - market makers, specialists, liquidity providers - markets can still crash.

I'm not sure why you claimed "This could never have happened a decade or two ago" and then provided evidence that it did - 1987. Markets have always crashed, and they will always crash - it cannot be legislated away.

Note that the markets recovered almost instantly from the May 6th "flash crash's" temporary lack of bid-side liquidity - the same cannot be said for the 1987 crash which was presided over by real live market makers."

-KD

Individual Stock Circuit Breakers Need Tweaking

Several weeks ago the SEC implemented the new single stock circuit breakers which temporarily halt a stock if its trade price moves more than 10% over a 5 minute period.  Astute observers have already noticed a few cases where stocks have been halted due to erroneous prints - most notably Citigroup (C) on June 29th, and APC on July 6th.  C was halted when it was trading with an inside market (NBBO) of $3.79 - $3.80, and an erroneous print of 8820 shares @ $3.3174 triggered a halt.  APC was halted when it was trading $39.14 - $39.15, and an erroneous print of 200 shares at $100,000 triggered a halt.

Back when the SEC asked for initial comments on this issue, commenter Peter mentioned in my comments section and in a letter he sent to the SEC that trading curbs would be better served if they were implemented off of changes in NBBO (national best bid offer) rather than trade price.  At the time, I was kinda burnt out with the whole thing, and didn't take the time to think through his points, but the recent halts based on erroneous trades highlight the message Peter was trying to get across.

First, let's look at what the circuit breakers are trying to accomplish:  the goal is to avoid May 6th type "flash crashes" when liquidity dries up.  However, the result of the implementation of the rules has been that erroneous prints are triggering halts.  Let me define "erroneous print."  Every trade in the equity markets gets reported, or "printed" to the "tape."  Ticker, shares, price, and some other additional information.   Much of this reporting is automated, but there are still situations where trades are reported "by hand."  When I was in the business, we had an "ACT Terminal" on our desk, and if a client came in to buy 100,000 SPY, which we sold to him, someone would walk over to this machine and manually key in the details to the ACT Terminal:  SOLD 100,000 SPY @ 110.56, include any additional modifiers regarding early settlement, or perhaps that the trade was an average price trade occurring over a period of time, and then hit SEND.  Everyone could then see the trade scroll by on the ticker tape (digitally!).

Of course, if the person typing in the trade details had "fat fingers,"  he might accidentally type 1000000 SPY, adding a zero, or perhaps 11056, missing the decimal point, and a bad trade would hit the tape, which would have to be corrected.

Nowadays, although I believe ACT Terminals still exist, most of this reporting logic, even when entered manually, is entered from a trader's order management system, which is tied into a tape reporting facility.

Why does all of this matter?  Because what happened in the C halt on June 29th is very different from what happened to ACN on May 6th.  To review, on May 6th in ACN, sell orders without restriction on price overwhelmed buy orders, and every bid was smacked, all the way down to 1c.  On June 29th, in C, this is very much NOT what happened - there were $3.79 bids the entire time - in other words, the order book didn't get "swept" - it was simply a bad price entered in the reporting of a trade.  Unfortunately, this bad report still triggered a trading halt.  (note: FINRA confirmed that this trade was manually reported by a broker dealer)

Similarly, with APC, you did not see every single offer up to $100,000 lifted.  On the contrary - a bad 200 share print at $100,000 triggered the halt.  It's important for readers to understand the difference between a "bad print" that results in a hiccup in a stock chart, and an order which results in real trades that decimate a thin order book  - which is to say, an order which is to buy more shares than are offered in aggregate, or to sell more shares than are bid for in aggregate - that is what happened on May 6th.   It's possible to have a "fat finger" error on a real trade too - that happens as well - although I don't think it's what happened on May 6th.  

So, we see that trading halts are being erroneously triggered.  Peter shares his concerns in another comment letter he sent to the SEC, in which he analyzed data from the last 18 months and determined that "Analysis shows that the current pilot circuit breaker logic would have triggered incorrectly on 158 securities at least 238 times in the past 18 months." He goes on to argue that "Erroneous halting of certain highly liquid and systemically important ETFs may further destabilize the markets. The analysis shows that SPY would have been erroneously halted twice in the past 18 months, potentially destabilizing the markets."

Another problem with the current circuit breakers is that anyone (with trade reporting capability) can effectively halt any stock any time they want just by throwing up a bad print on the tape! Talk about the ability to manipulate markets... This is definitely not a good thing, and further undermines fears people have about market veracity.  So how do we fix it?  As Peter suggested initially, one way is to make the halts based on the NBBO, rather than the last trade.   So, since C was $3.79 bid the entire time when the erroneous print was reported, the stock would not have been halted, since the NBBO did not move enough to trigger a halt.   If the computational power to maintain a constantly rolling evaluation of the 5 minute change in NBBO is too great, I think the same effect could be attained if the reference NBBO base price was updated occasionally, say, every 5 or 10 minutes (instead of continuously), whatever frequency data processing capabilities allow.

Perhaps another option would be to treat manually reported trades differently than trades reported based on automated logic.  Although it's certainly possible that bad logic or bad data could result in erroneous prints from automated methods, it seems that the likelihood of such erroneous reporting is lower.

Finally, there has been some discussion of having individual stock limits - like we currently have for futures markets - limit up and limit down.  Japan actually does a form of this with their individual stocks.  I don't really like this idea because any limits would have to be symmetrical on the downside and the upside. If we decided to set a down limit of 20% for individual stocks, then we'd also have to set an up limit of 20% - this would be problematic on the upside in the case of announced mergers with large premiums, or on the downside in cases of big lawsuits or failed drug approvals for biotech stocks.

In any case, I think it's clear that some relatively simple changes need to be made to the current circuit breaker rules so that erroneous prints do not disrupt trading.

-KD

Senator Bunning's Office Responds

I received an email on Thursday from Senator Jim Bunning's legislative director, William Henderson.  Unfortunately, it was sent to my secondary account, and I didn't notice it until this evening when I returned home from a weekend trip.  I feel it's only fair to post Mr. Henderson's email in full, as it is a response/clarification/enhancement to the post I wrote last week titled "Emergency Powers."  And oh, Mr. Henderson - if you ever want to contact me, drop me a comment on my blog.  It's a much quicker way to get in touch with me, and I'm happy to provide further input on the policies you guys are looking at.

Without further ado:

KD, I enjoy the blog and am a regular reader. It has been helpful as we have been working on the financial reform bill and, most recently, the stock plunge hearing today.

I wanted to clarify what Sen. Bunning's comments regarding emergency powers at the hearing today. His point was that the SEC and the exchanges have identified some changes they think should be made (the new trading curbs) but those changes are not yet in place and able to be used because the SEC's rule approval process takes a couple weeks. He was inviting Schapiro to ask for the ability to make such changes faster if she thinks that is appropriate. That is what he meant by emergency powers.

Regarding market orders, he agrees with you. I'll paste an exchange that started with Eric Noll of NASDAQ and Larry Leibowitz of NYSE Euronext on breaking trades and ended with a bit on market orders.

Finally, he said at the beginning of the hearing that he was glad to see the curbs are for moves in either direction, and not just down.

Hopefully this will allay your concerns a bit.

W

Mr. Henderson also included the exchange to which he was referring:

"Transcript:

BUNNING:
    It's all right. Thank you.

    Mr. Noll, I'm going to start this question with you, since you talked about it more in your written statement than anyone else. But I would like the others to respond as well.

    As I said in my statement, I am concerned about the way some trades were canceled. Given that everyone seems to agree the system worked the way it was set up to do, how do you justify canceling trades and protecting sellers from their bad decisions?


NOLL:
    I -- I share much of your concerns, Senator Bunning. And it was a very difficult day to make that decision. It was done in coordination with all of the other markets on an ongoing discussion and, quite frankly, lasted many hours trying to decide what the appropriate decision was fair.

    So we were trying to balance the need and requirement of what we would call moral hazard issues, which is making people aware and bear the consequences of their activities in the marketplace for good or for ill, with what was clearly a dysfunctional marketplace that wasn't functioning as it should function.

    So in the absence of any clearly erroneous trade, we looked at the DK of what we would call price discovery and the provision of liquidity.



NOLL:
    And we tried to draw that line -- admittedly somewhat more arbitrarily than I think any of us are comfortable with -- draw that line in an appropriate area where we did not reward anyone for bad behavior, but we did solve the problem of what we considered to be a dearth of liquidity.

    That being said, I think we are very confident that the stock-by- stock circuit-breakers that we're putting into place will prevent a reoccurrence of this kind of situation.


BUNNING:
    Looking back, we all have 20/20.


NOLL:
    I think that's true. So we -- we -- we believe that we'd like to put the stock-by-stock circuit-breakers in place. We think that will prevent this going forward, these kind of events going forward, but more importantly, we endorse Chairman Schapiro's desire that we have transparent, understandable, agreed-upon across all markets trade break clearly erroneous rules that remove the discretion from any one market actor or any group of market actors so that everyone knows visibly and clearly what those -- what those events are and how they will be triggered.


BUNNING:
    Anybody else like to jump in? Go ahead.


LEIBOWITZ:
    Sure. Sure. So I had the fortune of sitting on the Nasdaq Quality of Markets Committee at the time that the first erroneous trade policy went in. And I think, Rick, you were actually...


KETCHUM:
    I was there.


LEIBOWITZ:
    ... the CEO at the time or the COO at the time. And it troubled me then, and it troubles me now. Markets that have to resort to breaking trades as a response to abhorrent (ph) conditions are -- are -- are just not orderly markets, in my mind. It's not the way we should do our business.

    I think, in this case, the big challenge wasn't we had institutional investors who made a mistake. You know what? You're right. They should pay the price.

    The challenge here was that we had retail investors who had submitted market orders that essentially went into a black hole. They had stop-loss orders in high-cap stocks...


BUNNING:
    But -- but I'm sorry, sir. Sophisticated -- even if they're not sophisticated, anybody that puts a market order in knows exactly what's going to happen to a market order.


LEIBOWITZ:
    So I would agree with you that their broker probably does -- and maybe the answer is the broker should have stood up (ph) for that trade -- I would submit to you that a lot of the public does not. And I'll tell you...


BUNNING:
    A lot of the public doesn't know that if you put a market order in, it's executed?


LEIBOWITZ:
    They think, maybe it'll go -- it'll go -- you know, I'll be...

    (CROSSTALK)


BUNNING:
    Rather than a limit order?


LEIBOWITZ:
    Well, they don't realize that, when I trade Accenture, it's going to be down 99 percent when they get now.


BUNNING:
    I agree with that.


LEIBOWITZ:
    And -- and...

    (CROSSTALK)


BUNNING:
    But if you put a market order in, that's your execution.


LEIBOWITZ:
    You're absolutely right in that regard. And I think we have to make sure that it just can't happen in the market. We also need to talk about whether market orders should be allowed at all and how we educate people so these things don't happen.

    But I agree. There should not be the moral hazard of breaking trades. It is not the right way to make a market function properly."

It's good to see that Bunning understands exactly what a market order is, and I agree with Larry Leibowitz that the retail public does NOT understand exactly what a market order is, and that reform is needed to either educate the public so that there is no whining and there are no "victims" after the fact, or to simply protect Joe Retail from himself by preventing him from entering market orders.

-KD

Emergency Powers!!??!

From the NY Times' Dealbook:

"Federal market regulators are still unsure about the cause of the sharp stock market drop two weeks ago, and that worries Senator Jim Bunning."

Let me interrupt here - I'll tell you the cause of the sharp drop:  more sellers than buyers! If we're talking about the aberrant prints, like 1c in ACN, you don't need Sherlock Holmes for that one either:  sellers came in to sell stock regardless of price, and there were no buyers. 

"Mr. Bunning, Republican of Kentucky, told Mary L. Schapiro, the chairwoman of the Securities and Exchange Commission, that she should request emergency powers from the Senate to do whatever is necessary to prevent another market plunge until the cause of the May 6 flash crash can be determined. 

“If we get bad news out of the I.M.F. or Greece or Portugal or something that could have an adverse affect on our markets, we could see the exact same recurrence and we haven’t done anything,” Mr. Bunning said at a Senate hearing on Thursday."

Senator Bunning - there's an easy fix for this:  make sure that retail traders know that "market order" means "regardless of price."  Make sure that retail traders know that "stop orders" become "market orders" when their stops are triggered.  Once you protect the retail traders, no one care if the professionals shoot themselves in the foot with bad order types.  Yet, Bunning wants the SEC to have "EMERGENCY POWERS!"  Bunning:

“I think there comes a time you take emergency actions and if we are in that situation that we need emergency powers, all you have to do is come here and ask,” Mr. Bunning added.” We don’t want a recurrence, and we surely don’t want to arbitrarily break up trades that were legitimately done under a set of rules, and I would urge you to come and ask this committee for emergency powers.”

I can only hope that the literal translation of what Bunning means is NOT "If it looks like stock prices are going to go a lot lower, and there's nothing that can be done to prolong the Ponzi scheme, please let us know and we'll put regulations in place to prop up stock prices."

Cause that's what it sounds like to me, but maybe I'm just being cynical...

My favorite part of the article sounded like a little cynicism from the author:

"It is unclear as to what emergency powers the Senate could grant the S.E.C. to hold off another flash crash, given that the origins of the first disruption has yet to be determined."

-KD

Ban Market Orders!

The SEC, in their 150 page report on the May 6th crash, has section (around page 75) on "potential regulatory responses".  I found this interesting, since I've been constantly repeating that we should ban market orders if we want to protect people from themselves:

"We are considering ways to address the risks of market orders, and their potential to contribute to sudden price moves. Areas under consideration include: (1) requiring market order “collars,” thereby effectively converting market orders into limit orders; (2) prohibiting or limiting the use of market orders; (3) requiring broker-dealers to specifically warn retail customers about the risks of market orders, particularly in volatile markets; and (4) pursuing investor education initiatives as to the risks of market orders."

I'd be shocked if they implemented #2, but it's the simplest and most effective solution, and removes any and all potential excuses from the execution side of things.  I've specifically discussed all four of the potential changes the SEC detailed in that paragraph above.    Mary Schapiro - you could at least give me a hat tip...

-KD

SEC: Comment Period for Individual Stock Circuit Breakers

I gave you this story last week.  Today, it's official.

"Under the proposed rules, which are subject to Commission approval following the completion of the comment period, trading in a stock would pause across U.S. equity markets for a five-minute period in the event that the stock experiences a 10 percent change in price over the preceding five minutes. The pause would give the markets the opportunity to attract new trading interest in an affected stock, establish a reasonable market price, and resume trading in a fair and orderly fashion."

-KD

Breaking News: What the SEC's New Individual Stock Curbs Might Look Like

This isn't cast in stone yet, but I'm told that starting Monday, a pilot program will be filed requiring all exchanges to apply new rules to S&P 500 stocks and select active ETFs, designed to prevent a rehash of Thursday May 6th's extreme price action.

Trading in each stock will be monitored by the exchange it's listed on.  Curbs will be triggered when there is a 10% decline (or advance) in any rolling 5 minute period between 9:45am and 3:30pm.  If the curb is triggered, the listing exchange will send out a message, and trading will be "paused" for 5 minutes, during which time no trading would occur - quoting only. Once the listing exchange prints a new trade, the pause would be lifted.  This is similar to the way that stocks come out of breaking news trading halts currently.

The plan will likely be implemented in 30 days.

EDIT:  in case it's not clear, it seems that the goals of this plan are to 1) allow for "circuit breakers" during times of large price movement and 2) to put the onus of responsibility back on the listing exchange - under these rules, the listing exchange is the one who controls the "re-opening" of a stock.

-KD

The Little Guy Has Nothing to Complain About

I see a lot of comments about how the "little guy" feels like the system is stacked against him. Who are we talking about here?   The small investor?  Au Contraire:   There has never been a better time in history to be a small investor in the United States.  Note - there is a difference between investors and traders, which I'll get to in a minute.

-We've had a veritable FLOOD of new ETFs created, which allow investors to easily and with granularity select exactly what kind of exposures they want.   Small retail investors can now get customized exposure to almost every sector and industry, as well as fixed income strategies, developed markets, emerging markets, international indices, commodities and even currencies.

- Technology has allowed brokerage firms to provide speedier access and cheaper commissions.  One can now trade for $9.99 or less, and customize executions to decide which exchange to send orders to, as well as use advanced tools for research, charting, and rapid market access via front ends (I use Etrade's Power Etrade, personally, and it's decent).

- Bid/ask spreads have decreased from quarters 10 years ago to pennies today.  That's a good thing - no matter how you slice it.

- Individuals can easily get access to after hours trading sessions, should they so desire.

 - Access to information:  the individual investor has ample access to an insane amount of information:  SEC filings, news, research reports, rumors.  When I first got interested in stocks as a mere pup of about 15 years old (and this is less than twenty years ago), I would read the earnings reports in IBD looking for companies with increasing earnings.  Then, I'd call my broker, speak to an actual person, and get the phone numbers for the companies I was interested.  THEN, I'd call the companies themselves and ask them to send me their latest annual reports, 10k, 10q, and if I was lucky, I could begin doing some analysis a week later!

In my opinion, the most important items for an investor are selection of products, availability of information,  ease of access, and costs of trading.   I don't know how anyone could argue that we're at unprecedented "bests" in all four of those categories.

Now, how about the small "trader?"  Well - that's a different story, and it should be.  Our markets aren't  constructed (nor should they be) so that any monkey sitting at home can turn on a computer and print money by easily navigating our capital markets.  If you want to trade with the big boys, who are faster than you, smarter than you, more experienced than you, and have more technology than you, you're going to lose.  The important thing is that this "big boys" club isn't an exclusive club - anyone with the resources can develop their own trading systems and gain equal access to the same "privileges."

So if you're a small trader and you're disillusioned with the markets and are throwing in the towel - good for you!  That's your prerogative - no one said trading was easy - but I don't think anyone needs to weep for you.   No one has the right to demand to be able to make profits trading their personal account! Take a longer term view, do some real research, and invest in companies at prices which you like.  If you're right, you'll make money in the long run.  THAT is the important feature of our markets. (If you want to talk about how markets are rigged, I think they are actually rigged in one way: against the prudent short positions.  Markets are rigged to go higher.  We need them to - our society's spending habits depend on it, because we have come to think  of the value of our portfolios as synonymous with our wealth.  If you're positioning yourself from the short side, you may also eventually be proven right, but you frequently have to endure a lot more pain in the process)

The most important point, though, is that all of this fancy trading stuff doesn't hurt the little average Joe Investor!  It doesn't hurt you when someone or some electronic thing crushes your beloved ACN down to a penny and then it rebounds in a matter of seconds.  Other people's mistakes are YOUR opportunities.  If you're really the investor you claim to be, you don't care about short term price movements, and need not lose faith in markets because of the short term aberrations.  Of course, I already wrote a whole post about this:  don't lose faith in markets, lose faith in market orders.

Everyone, investors and traders alike, should certainly understand one important thing, though: The Market doesn't owe you any price for your stock.  If you use a market order, you are saying "I want to be filled, regardless of the price, even if the price on my sell order is 1c."  Now, I'm guessing that people don't really mean that.  Ever.  I've said it before, and I"ll say it again:  in my opinion, you should NEVER use a market order.

Liquidity is not a right, and should not be assumed.  Expecting it to be there is a mistake.  Liquidity gaps have happened throughout the history of trading markets, and they will continue to happen.

John Hussman provided some great old quotes in his most recent piece

"Of all the mysteries of the stock exchange there is none so impenetrable as why there should be a buyer for everyone who seeks to sell. October 24, 1929 showed that what is mysterious is not inevitable. Often there were no buyers, and only after wide vertical declines could anyone be induced to bid ... Repeatedly and in many issues there was a plethora of selling orders and no buyers at all. The stock of White Sewing Machine Company, which had reached a high of 48 in the months preceding, had closed at 11 on the night before. During the day someone had the happy idea of entering a bid for a block of stock at a dollar a share. In the absence of any other bid he got it."

John Kenneth Galbraith, 1955, The Great Crash

Hussman, in his own words:

"If you spend a good portion of your time studying price-volume behavior, "air pockets" of the type we observed last week become familiar parts of the landscape (though they are typically not so distilled into a single intra-day move). Robust demand is the only thing that holds prices from falling vertically in the face of eager selling. Overvalued, overbought, overbullish markets are often already spent of that demand. As investors suddenly became aware of that reality on Thursday, all I could think was "welcome to my world.""

I've grown fond of another expression I coined, which I think accurately describes the market action of last Thursday, May 6th: Markets aren't efficient, but they are efficient enough!  Was is crazy that ACN and other stocks traded down to 1c?  Of course it was, and we will probably modify our market structure to try to prevent it from happening again - but note this: the aberration was quickly corrected by The Market, and the lasting damage for the small individual INVESTOR was nil.  In fact, it was an opportunity to pick up some stock at fire sale prices!

There's no need to weep for the Joe SixPack American Retail Investor.  There has never been a better or more rewarding time for individual investors who do their homework to be able to quickly, cheaply and easily invest in the companies they choose to.

-KD

The SEC Talks About Reforming Market Mechanisms

Via Calculated Risk:  Mary Schapiro sez:

"In addition to time out mechanisms, we will consider any other steps that potentially could prevent or help minimize the harm that occurred on May 6. These include: (1) exchange-level erroneous order filters; (2) “collars” on the prices at which market orders or aggressively priced limit orders can be executed; (3) limitations on the size of market orders or aggressively priced limit orders; and (4) eliminating the practice of displaying stub quotes that were never intended to be executed."

So that's a total of 5 prospective improvements to be made, 4 of which I discussed here already. 0)Time out mechanism: NYSE's LRP already exists, 1) preventing aberrant trades before they happen, 2) individual stock trading curbs, 3) limit the size of market orders - to ZERO! 

I didn't discuss her point number 4:  "stub" orders, and I don't think that would make a difference.  If you do the other 4 things, "stub" orders become irrelevant.  By the way - a "stub" order is a boundary "place holder" type of quote, like a 1c bid, or a $999,999 offer.  Schapiro seems to think that if there was no 1c bid, then the 1c trades couldn't have taken place.  That may or may not be true, but again, will be made irrelevant if the other improvements are made.

-KD

Recap: Crash Coverage and Greek Tragedies

So I've been writing pretty prolifically for the past several days, and have seen record blog traffic resulting from what I think were some quality posts, and some nice mentions from major sources.  Felix Salmon and Tyler Cowen each had nice things to say about my coverage of "The Crash,"  as did EconomicsOfContempt.

Tyler Cowen and the Globe And Mail each linked to my Greek ramblings today, as did Clusterstock.

Just in case you missed any posts, here they are in the order I wrote them.  I think they are all well worth the time to read, and again, I am lucky to have a very tuned in audience of market participants who have added exceptional value in the comment threads.  Thank you all for that.  And thanks to the few people who hit my Tip Jar!  Much Appreciated.

1) WTF Stocks? 

"The rumor is that some Joey Baggadonuts meant to type in 15M (for million) but typed 15B (as in... BILLION) instead.  Now, I can't believe that guys can still do this. It boggles my mind that there aren't risk controls in place.  When I was trading, we took great lengths to make sure that you couldn't do this - even if you had fat fingers, if you dropped a can of soda on your keyboard, if a ferret ran across your computer, or if you suffered from some sort of dementia and just went crazy - you couldn't send an order like that without being 100% sure that you were doing it, if you could even do it at all.  When we moved to a new execution system from a third party, we mandated that they install confirmation screens on every order entry window.  "The devil is in the details," my boss always used to say..."

2) More on The Crash:  Possible Triggers and HFT

"While I don't want this to become a debate over the merits of high frequency trading, we need to acknowledge a few things:  1) there is a red herring argument that one of my loyal readers already made in a prior comment thread, to the tune of "but you said that HFT algos would provide all the liquidity we need!"   No  - what HFT proponents say is that HFT algos provide liquidity, which is always a good thing. I would always prefer liquidity to lack of liquidity.  Now people are going to crucify them for NOT providing liquidity! Well, which is it?  If you're complaining that you don't like the HFT liquidity, here's what happens when you don't have HFT liquidity!  I read comments on other blogs that said things like "I was trying to buy near the lows but HFT algos kept out bidding me by a penny!"  Well - wouldn't that be good? Wouldn't that STOP the price decline, if HFT algos kept putting in higher bids?!?!?"

3) On Canceling Trades

"And the Law of Unintended Consequences rears its ugly head again.  Merkel's point is simple and accurate:  if buyers who step in later see their trades canceled, it removes all incentive for them to step in - and then you don't get the bounce back that we saw!  Think about how much havoc it causes a trader who astutely bought cheap stock, then sold it out at a profit.  He's now short!  Or, he spent the entire day wondering if his order would be canceled, in a state of limbo.  What's the alternative - that traders should just assume that the orders will get canceled, and NOT buy stock?  Guess what - if no one buys, the stock stays cheap!  SOMEONE has to buy, and that someone shouldn't be penalized in favor of remedying the ignorance of the seller who screwed up."

4) The Best 10 Minutes You Will Spend All Weekend

The audio of TraderAudio's Ben Lichtenstein's call from  the S&P 500 futures trading pit during the crash.  I listen to this every day now, and will probably put it on my Ipod to listen to while I run!

5) Market Speed Bumps

"There's one key issue, though:  when the LRP is triggered, the NYSE's quote (behind the scenes - you wouldn't see it, but the market centers who "talk" to each other to make sure that you get the best price would see it)  gets a special tag on it, essentially labeling it as "slow," and as a result it's no longer protected by Reg NMS as part of the NBBO.    Essentially, all the other market centers and exchanges no longer have to honor the NYSE's prices, and can simply trade "through" the NYSE's bids. 

Now, this is a problem. If we're going to have trading curbs in individual stocks, they need to be standardized across all trading venues!  Furthermore, it's clear to me that since the NASDAQ wants to cancel trades that are out of line with prevailing prices, we do need individual stock curbs.  Why on earth should the trades be allowed to happen at all if they are then going go be canceled?  Be proactive - prevent the trades from happening in the first place! "

6) Remedies:  Don't Lose Faith in Markets  - Lose Faith in Market Orders

"there's really no reason why we couldn't ban the "market" order type.  Really.  There's no reason why anyone should ever use a market order. None.  In fact, BATS exchange automatically adjusts all incoming market orders to limit orders, where the limit is the greater of 50c or 5% of the stock price:  higher for buy orders, and lower for sell orders.  Just a little bit of built in protection. "

And then, on to Greece:

1) I Learned it By Watching You!

"The Ponzi world is in full effect, with Europe's massive bailout program announced last night.   Basically, in case you don't get this - the ECB (European Central Bank - Europe's version of our Federal Reserve)  will buy the crappy assets no one else wants to buy.   It's like TARP for Europe, only their problem is that the "toxic assets" are not complicated synthetic structured mortgage bonds - it's their own currency and the debt of their constituent countries!

Solving debt problems by printing more money... Again... As if that will solve the problem - which, remember, is INSOLVENCY...  I guess we (the U.S.A.) can't complain, though - after all, we wrote the book on Ponzi bailouts. (related:  see FNM's earnings from last night).  The Fed and Helicopter Ben originally created this plan and implemented right here on our home soil, buying mortgage backed securities and treasury bonds, and then, when they finally called it quits on that program, simply using Fannie and Freddie to overpay for mortgage loans in a relentless attempt to prop up the housing market."

2) EuroTarp - It's Like Watching A Re-run of USA 2008

"Europe is making the same assumption that our Fed and Treasury made back in late 2008 - that the market was screwing up and not properly recognizing valuations.  Why is it that when assets aren't priced as governments wish they were priced that it means the securities markets are malfunctioning?  As I commented on Marginal Revolution:  we, in the USA, already watched this show - and guess what - it wasn't malfunctioning securities markets at all! It wasn't temporarily depressed prices (LIQUIDITY PROBLEM) - it was that the assets really weren't worth as much as people previously thought (SOLVENCY PROBLEM!). Really - we did EXACTLY this in the US, but didn't learn anything from it, apparently.   Just ask Fannie Mae.

Greece's debt isn't mispriced due to a malfunctioning securities market or because evil speculators are manipulating it. It's priced as it is because Greece is insolvent and people KNOW that."

 In closing, here's a picture of Oscar (r)  and Mr. Griffey (l), who have become fast friends:

 -KD

Market Speed Bumps

If you've missed my previous posts on the Crash of May 6th, please go back and check them now - there are also many intelligent comments in the comment threads.  The Best Ten Minutes You Will Spend This Weekend, Canceling Trades, Possible Triggers & HFT, and WTF Stocks?

I want to take one more post to explain what one of the problems was during the crash - and I think this will help with potential solutions, and with understanding what went wrong.  First, we have a lot of different market centers now.  The market is fragmented.   That means that you can trade IBM on the NYSE, or alternative exchanges, ECNs (electronic networks) or dark pools.  Reg NMS "protects" the NBBO - national best bid or offer. That means that regardless of what exchange (I'll use the term "exchange" instead of "market center" because it's easier, although these alternative market centers are not all technically "exchanges") you trade on, you have to trade at a price that is at least as good as the best bid or offer on all of the exchanges.  This is a good thing.

The NYSE, however, has a provision called LRP - Liquidity Replenishment Points - which is designed to act as a sort of market speed bump during times of significant price movements.  Many people are familiar with "trading curbs" we have for the major indices, which can result in altered or halted trading if the major indices move by a certain amount intraday.  Well, the LRP is like a trading curb for an individual stock - it temporarily changes the stock from automated electronic matching to specialist controlled matching - the NYSE specialist steps in and tries to slow things down a tad while he sources liquidity and tries to pair off orders.  In the NYSE's own words:

"A volatility control built into the Display Book to curb wide price movements resulting from automatic executions and sweeps over a short period of time.   When triggered, LRPs automatically convert the market temporarily to “slow” or Auction Market only mode, allowing specialists, floor brokers and customers to supplement liquidity and respond to the stock’s volatility. "

This is also, potentially, a good thing.  If people are worried about automated electronic executions - and it's pretty clear to me that people ARE worried - then the LRPs are a backup plan that take over in times of stress.  Interestingly, the trigger thresholds are not very large - they depend on the price of the stock in question and its average daily volume, but for a stock like IBM the LRP would be triggered with a move of only $1 (that's not a $1 change on the day, it's a $1 change in a hurry).

There's one key issue, though:  when the LRP is triggered, the NYSE's quote (behind the scenes - you wouldn't see it, but the market centers who "talk" to each other to make sure that you get the best price would see it)  gets a special tag on it, essentially labeling it as "slow," and as a result it's no longer protected by Reg NMS as part of the NBBO.    Essentially, all the other market centers and exchanges no longer have to honor the NYSE's prices, and can simply trade "through" the NYSE's bids. 

Now, this is a problem. If we're going to have trading curbs in individual stocks, they need to be standardized across all trading venues!  Furthermore, it's clear to me that since the NASDAQ wants to cancel trades that are out of line with prevailing prices, we do need individual stock curbs.  Why on earth should the trades be allowed to happen at all if they are then going go be canceled?  Be proactive - prevent the trades from happening in the first place! 

What's funny is the back and forth between the exchanges in the aftermath.  From the NY Times:

"The absence of a unified system to halt trading in individual stocks led to bitter accusations between exchanges on Friday. Robert Greifeld, chief executive of Nasdaq OMX, appeared on CNBC to criticize the New York Stock Exchange for halting trading for up to 90 seconds in half a dozen stocks on Thursday.

“Stopping for 90 seconds in time of crisis is exactly equivalent to not picking up the phone,” Mr. Greifeld said."

A few minutes later, Duncan L. Niederauer, chief executive of NYSE Euronext, responded in an interview on CNBC, blaming Nasdaq’s computers for continuing trading while the market was in free fall.

“These computers go out and just find the next bid they can find,” he said.

Mr. Niederauer acknowledged the need to introduce circuit-breakers along the lines of those already in place on the Big Board, and his views were echoed by some chief executives of the new exchanges.

I think it's likely that we'll see some sort of standardized individual stock trading curbs instituted as a result, which seems to be a pretty reasonable solution.  I can only hope that curbs will be temporary (and by that, I mean that they will be in place for only a short time after they are triggered) and balanced - so that they aren't designed to put an extended halt to trading if stock prices fall, while continuing to allow trading if stock prices rise.  

 

-KD

The Best Ten Minutes You Will Spend This Weekend

If you do nothing else today, listen to this audio clip of Thursday's crash live from the S&P 500 futures pit in Chicago.  Pure, unadulterated adrenaline and chaos.  Pure. 

For those unfamiliar with the lingo, he's leaving off the first two digits, so when he's saying "91 even bid" he means 1091 in the SPX futures.  He says "even" because they were just trading in whole numbers, not sub-dollar increments.  Note that at the peak panic they were ten points wide: 1060-1070.  This is for one of the most liquid increments in the world.  Look back over the last several months and see how many days we had where the S&P500 didn't have a 10 point range for a whole day - and this was the bid-ask spread.

Also, note, that this is an old school, auction market.

Incredible.

(if the embedded audio above didn't work, click here)

EDIT: The voice is Ben Lichtenstein of Trader's Audio. Well done, Ben. One for the ages.

-KD

Does Anyone Want to Defend the Decision to Cancel Trades?

In the wake of yesterday's market bloodshed, the NASDAQ announced that they'd be canceling trades more than 60% off of prevailing last sale before things went haywire.  Now, I addressed this in last night's post, and others are writing about it this morning.

First of all, back to a solid explanation of what happened, courtesy of, believe it or not, a Georgetown Finance professor, James Angel:

“The LRP model doesn’t work,” Angel said. “The idea that when the market is going crazy you can slow down trading in one market and not others means that sell orders were churning through the books at every other market. NYSE dropped out of the running.”

So when the NYSE tries to slow things down, Reg NMS requires orders to be rerouted to other market centers.   A commenter on my previous post explained it thusly:

" I believe the core problem here was a real order imbalance with lots of volume (which took us down the original 350), then NYSE halts these stocks, the market orders get rereouted (REG NMS and all) to ECN's where there is much less liquidity, and what liquidity is normally there is mostly provided by the nefarious HF strats who were rightly scaling back risk. So the 10K shares that might have been a downtick on NYSE blows through the BATS book completely."

Market orders can do a lot of damage to thin order books.  Folks - if you're using market orders, you had better be aware of the risks.  Interestingly, the NYSE, who has been losing market share to other market centers as a result of the ongoing market fragmentation, is positioning their positive spin on the crash, basically blaming the other market centers for failing to stem the cascade.

Paul Kedrosky asks aloud: "why are we wiping out all the errant trades by runaway algorithms and market battle bots?"

David Merkel points out, emphasis mine: "NASDAQ should not have canceled the trades.  It ruins the incentives of market actors during a panic.  Set your programs so that they don’t so stupid things.  Don’t give them the idea that if they do something really stupid, there will be a do-over."

And the Law of Unintended Consequences rears its ugly head again.  Merkel's point is simple and accurate:  if buyers who step in later see their trades canceled, it removes all incentive for them to step in - and then you don't get the bounce back that we saw!  Think about how much havoc it causes a trader who astutely bought cheap stock, then sold it out at a profit.  He's now short!  Or, he spent the entire day wondering if his order would be canceled, in a state of limbo.  What's the alternative - that traders should just assume that the orders will get canceled, and NOT buy stock?  Guess what - if no one buys, the stock stays cheap!  SOMEONE has to buy, and that someone shouldn't be penalized in favor of remedying the ignorance of the seller who screwed up.

I commented on both Kedrosky's and Merkel's blogs that the goal wasn't to protect the battle bots, it was to protect the retail investors who screwed up because they used the wrong order type (although that doesn't make it right - as I mentioned in yesterday's post too).  Again, we see the "bailout" theme - bailing out those who screwed up and preventing them from bearing the consequences of their bad decisions.  In case it's not clear, of course I don't think that algos gone wild should be bailed out either via canceled trades.

If anyone wants to defend the decision to cancel the trades, I'm all ears - but your argument needs to be better than "HEY ITS NOT FAIR THE COMPUTERS RIPPED ME OFF AND MY STOP ORDER GOT EXECUTED AT A PENNY WTF OMG *$XYS !^^!@&!*#"  If you don't understand that this can happen with a stop order, don't use stop orders.

-KD

More on the Crash - Possible Triggers, and High Frequency Trading

So I wrote this piece earlier, talking about possible explanations for the carnage today, but not liking any of them.  Then I remembered an email I got from a former broker of mine around 2:15pm today, talking about the carnage in the BRL-JPY exchange rate.  You can look at the Yen vs other currencies too, but the bottom line is that the yen spiked before the S&P tanked.  What does this mean?  Well, the yen is the base currency for the "carry trade."  You can borrow Japanese Yen, pay their interest rate (basically zero) and invest in other currencies and their markets.   You earn the difference in interest rates - the carry. 

The email I got was actually a little different from the standard carry trade explanation:

"Please see attached chart -- BRLJPY is down 6.2% today and moving quickly, looking at this cross vs SPX you can see it bottomed earlier than equities and have mirrored. This represents probably the single biggest Japanese retail FX position. As I mentiond this morning we saw some very big moves in FX vol and Japan is largely closed this week, this could lead to a much bigger move when Japan comes back next week.  Risk assets are becoming highly correlated again."

I think his point was that this indicated a massive de-risking by Japanese customers - selling their higher yielding BRL (Brazillian Real) positions, shifting back into their low yielding yen positions.

Now, there are some facts:  1) markets were selling off already before the big crash.  2) there is some significant global instability, centered around questions about what will happen in Europe.  Another former colleague of mine writes:

"there is a huge problem in Europe with over night Commericial paper market. check out EURBS5 ; the market completely closed and there was no money today.

estimate balance sheet of european banks is 5.5trillion of which 1.5 trillion is funded overnight using commercial paper - sounds like this is the major concern"

In plain English, the fear is that Europe is about to undergo a Lehman-esque scenario where none of the banks are lending to each other.  I would expect the ECB and even the US Fed to step in and provide ample liquidity, but in any case, there are some serious tremors effecting global credit and equity markets.

And then comes number 3 - the one that everyone will be talking about:  It's almost impossible to argue that algorithms didn't play a role in today's price action.  As I wrote earlier, it seemed likely to me that this looked to be a case of Algo's Gone Wild, feeding of each others signals and resulting in a crazed feedback loop of selling.  However, the guys I've talked to so far who are major players in the electronic trading space have told me that they had no issues with their models today - things were normal, and the computers didn't "take over" or "go bezerk" or rack up massive losses.  If there are any readers out there running quant models - please let me know your thoughts. 

The same big electronic trader suggested that one possible explanation is that an algorithm gets into a "sell loop," where it is sending out a sell order which, for some reason or another doesn't get immediately acknowledged, or doesn't get acknowledged within the threshold for the algorithm.  So, the algo, thinking its order didn't make it,  spits out another order, which doesn't get acknowledged,  and it spits out another, etc etc etc.  Why would the algo be coded to send out a new order before it had an "out" on the prior order?  I don't know - that seems odd to me, (any algo writers out there?  please share your knowledge in the comments section) but I remember a great story that my boss used to tell on our trading desk about how in the old days, when they sent a program trading order to sell a basket of stocks, the old dot-matrix printer behind them would loudly whir to life and print up a confirmation that the basket went.  One day, trying to sell a basket, they got no confirmation.   Silence.  So they hit the button again.  And again... and again... Until finally someone shouted - "THE PRINTER IS OUT OF PAPER,"  as they watched the market fall under the cascade of sell orders that had just been sent.

A third big player in this space just told me "all the HFT guys pulled out of the market instantly," which seems to jive with an article that the WSJ wrote this afternoon.  The high frequency traders don't want this chaos either - it makes it more dangerous for their models to get hooked long or short stock.

While I don't want this to become a debate over the merits of high frequency trading, we need to acknowledge a few things:  1) there is a red herring argument that one of my loyal readers already made in a prior comment thread, to the tune of "but you said that HFT algos would provide all the liquidity we need!"   No  - what HFT proponents say is that HFT algos provide liquidity, which is always a good thing. I would always prefer liquidity to lack of liquidity.  Now people are going to crucify them for NOT providing liquidity! Well, which is it?  If you're complaining that you don't like the HFT liquidity, here's what happens when you don't have HFT liquidity!  I read comments on other blogs that said things like "I was trying to buy near the lows but HFT algos kept out bidding me by a penny!"  Well - wouldn't that be good? Wouldn't that STOP the price decline, if HFT algos kept putting in higher bids?!?!?

On the other hand, 2) there is no doubt that higher speed markets (like we currently have) will have higher speed price movements in boundary scenarios like today.    Price movements get exacerbated by speed - but notice that prices recovered quickly too. So, that begs the question - who got hurt today?  After all, I asked my dad, "did you see what happened in the market today?"  "Yeah - the Dow was down 300 something points."  he replied.  "Yes - but it was down 1,000 at one point!"  I explained.  He had no idea - it didn't effect him!  It shouldn't effect most people!  If you left your trading desk to take a dump you might not have known anything crazy had happened when you got back.  If you are a normal retail investor who isn't staring at the screen or watching CNBC all day, you probably didn't even know what happened!

The obvious answer of "who got hurt?"  is anyone with a stop-loss order.  Let's go to Investopedia for a definition, and a perfect example of what the problem is:

"An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit an investor's loss on a security position.

Also known as a "stop order" or "stop-market order". 

They continue:

"Setting a stop-loss order for 10% below the price you paid for the stock will limit your loss to 10%. This strategy allows investors to determine their loss limit in advance, preventing emotional decision-making.

It's also a great idea to use a stop order before you leave for holidays or enter a situation in which you will be unable to watch your stocks for an extended period of time."

Ahhh.. But there's a problem, isn't there - and you saw it today.  When the stock hits your limit and triggers your stop order, it sends a market order.  Obviously, in gapping markets, this can be deadly.  For this reason, I'd suggest never using a stop market order - if you really want to have that order in there, use a stop LIMIT order, perhaps with a limit even a decent percentage below your stop price - so that when the order gets triggered, you are trying to execute a sell order with a limit slightly below your trigger price - but not at the market.  It all gets back to the fact that I would never use a market order... but let's continue:

NASDAQ has declared that they will cancel trades where the price varied by more than 60% from the prevailing price at the time (I reported earlier that I'd been told the threshold would be 30%).

Now, I liked the comment I read on a Clusterstock post this evening that said:

"I am waiting for someone to explain why the algos  should be entitled to an expectation that the exchanges  will cover their butts when their trading programs go nuts"

That's a great point.  If we're going to allow pervasive algorithmic trading then why do any trades get canceled at all?  I THINK that the NASDAQ is canceling these trades in the interest of orderly markets, which certainly is a reasonable goal, but again, it's about bailouts and responsibility.  Of course, they also don't want Mom and Pop Retail to have to eat the results of their stop orders gone bad, but in bailing out Mom and Pop Retail, they are also bailing out the electronic algos  - if there were any, and it seems likely that there must have been SOME - who sold cheap stocks.

Ok - so, in an effort to avoid a lengthy "HFT SUCKS!" - "NO - HFT IS AWESOME" debate, I want to leave you with two quotes from bloggers I read regularly, and which I think are both very valid.  First, the "algo's certainly didn't help" point,  from one I've been quoting a lot lately, The Reformed Broker, Josh Brown:

"The "Fat Finger" thing is nonsense.  Maybe someone made a sizable error, but one cannot deny the fact that the algo-driven tradebots poured gasoline on the fire.  The machines were triggering stops and wrecking everything in sight before human beings with qualitative senses could get a handle on what was happening."

And then, the "this has happened before, without computers, and it will happen again, with computers" view from TPC:

"There’s all sorts of speculation over what caused the crash today.  The answer is simple.  Pure unadulterated fear.   Everyone is looking for someone to blame, but we’ve seen this happen in markets for hundreds of years.  It happened before there were computers and it now happens that there are computers.  Today was a classic fear filled day.  We saw huge downside in many debt and forex instruments before the crash and the equity markets were the last to capitulate.  The bids fell off the board and the sellers just continued to hit the bids.  There might have been some “fat finger” trades or some electronic trading that contributed, but this was primarily fear.  Good old fashioned fear.  This has always happened in markets and will always happen in markets.  It’s as simple as that as far as I’m concerned.

Investors are scared out of their minds as China looks like it is slowing substantially and Greece and the EMU appear to be on the brink.  There are real fundamental reasons for the recent declines in stocks.  In addition, it’s important to remember that there are a mountain of longs that have piled into the market in recent weeks and months with the expectation of a nice easy recovery trade.  That is clearly off the table and there is a huge trade being unwound here.  Greed has quickly turned to fear."

The only quibble I have with TPC's comment, again, is that I don't think that fear explains stocks getting hit so hard that they fall to prices of a few pennies.  I've never seen nor heard of that before, and I don't think it would have happened if we had old school specialists standing in the middle slowing down every order.   That's not to say that I think old, slow, trading is better, however. 

-KD

Holy Cow. WTF STOCKS? Heres' What I'm Hearing

Ok - first, disclaimer:  I'm up here in the woods of New Hampshire.  I don't have Bloomberg, I can't see how much stock printed at each of the crazy prices, and I was out buying plants at the time the crash happened, notified by a text from the Big Show that read simply: "HOLY FUCK."  BUT, I do have a lot of experience with market structure, index arb, electronic execution and the like, and I am still in close contact with several senior people in these roles at major firms - I'll get to what they have told me in a minute.

Now, here's what I do know:  

1) people are talking about a fat finger error in the e-mini futures.  That makes no sense to me. If there's an error, I think it HAS to be in the "cash" basket - in other words, stocks, not futures. That's the only way you can get stocks like ACN to trade down to pennies. YES - pennies.  Futures errors wouldn't do that.  Complicating issues, though, SIZE traded in the e-mini SPX futures as this was happening - $15B or so in notional... So that makes it look like futures were involved also! Or perhaps that was everyone else in the market panicking to sell the most liquid asset  as they saw the stock prints.  

2) another initial thought I had was related to a discussion I had with a friend a mere two days ago about "peer factors."  Peer factors are, dumbed down, the way to describe how a quant model will model the fact that everyone has the same inputs in their model.  If all the models are correlated, then, when they are triggered, things can go bad in a hurry. HOWEVER, a buddy of mine who runs quant trading at a major firm told me that he has several of these models running currently and that they were fine today - it wasn't a Terminator-esque case of the machines becoming self aware - at least not in the peer factor quant models. 

3) The rumor was that Citi had a major execution error, yet another buddy of mine told me he had a lengthy call with them, where they denied it.

So, how can this happen?  Well - some execution systems will allow you to type in the size of the basket.  The rumor is that some Joey Baggadonuts meant to type in 15M (for million) but typed 15B (as in... BILLION) instead.  Now, I can't believe that guys can still do this. It boggles my mind that there aren't risk controls in place.  When I was trading, we took great lengths to make sure that you couldn't do this - even if you had fat fingers, if you dropped a can of soda on your keyboard, if a ferret ran across your computer, or if you suffered from some sort of dementia and just went crazy - you couldn't send an order like that without being 100% sure that you were doing it, if you could even do it at all.  When we moved to a new execution system from a third party, we mandated that they install confirmation screens on every order entry window.  "The devil is in the details," my boss always used to say...

Each trader had execution limits - that meant that I couldn't send a $1B basket no matter how badly I wanted to.  Pure and simple - my systems login wouldn't send it.  Now, on certain days, I'd need to execute billion dollar baskets, so we'd have to change the risk parameters - but in general, there were caps on the size of each basket, the total volume for the day, and extra warnings if you tried to send an order that was even 25% of your max quantity - you'd have to click through confirmation boxes of the type "ARE YOU SURE YOU WANT TO DO THIS?"

Anyway, what will happen in the aftermath of today's frenzy?  One contact told me that they did some quick math and figured that in S&P500 stocks, $31Billion of notional traded below the 1100 level in the SPX.  That is a lot of stock.  A different former colleague told me "I  think people figured it out and bought it back ahead of the offender. I also think the person with the mistake had time to cover."  I'm also told that all trades more than 30% off of stable last sales after 2:30pm will be busted.  THIS IS WHAT I'M TOLD - THIS IS NOT A GUARANTEE.  In other words, if you scooped ACN at 10c, you're probably getting that trade busted.

we'll await further developments...

-KD