Apple and the risks of trading 29,000 times per second

“By now anybody who reads the business pages knows that BATS Global Markets screwed up its initial public offering big time Friday by mangling trades in a bunch of stock symbols at the top of the alphabet, including Apple (AAPL) and BATS, its own stock,” Philip Elmer-DeWitt reports for Fortune.

“Apple’s shares briefly fell by more than $55 per share,” P.E.D. reports. “BATS, which had been trading for more than $15, fell to less than 4 cents. NASDAQ quickly erased all those trades and BATS was allowed to cancel its IPO.”

P.E.D. reports, “The official explanation for what happened — or at least the one BATS and the Security Exchange Commission worked out Friday — is that software in a server covering stock symbols from A to BFZZZ went a little haywire, spitting out what are known on the Street as ‘false prints.'”

Read more in the full article here.

[Thanks to MacDailyNews Reader “David G.” for the heads up.]

17 Comments

    1. What? You’d rather they spend time on an idiotic mistake that affects mostly wealthy people than on people who intentionally subvert Apple’s terms & conditions for developers as a means to intentionally invade the privacy of thousands of people?

    2. The same moron iOS developers that grabbed users’ contacts info without informing the user, sending that information to their servers and having no idea what they took the information for.

  1. I predict the financial side brokers will pressure the SEC to allow millisecond trades to continue, which is essentially almost the definition of speculative trading.

    One of these days I can see deliberate manipulation of stock prices that are hidden where the SEC can’t identify them and…

    As a matter of fact lots of programmers are probably doing it now, refining it and noone knows about it.

  2. It’s interesting to consider how much malfeasance could be avoided by three simple rules from the SEC. 1. All transactions have a mandatory 60 minute delay between order placement and execution; 2. You can’t place an order you can’t pay for; 3. You can’t agree to sell shares of stock you don’t already own.

    Trading in milliseconds is not investing, it is gambling. I suppose forcing Wall Street to get casino licenses might be an alternative, but casinos have a lot of rules to follow.

    1. no market could operate with those rules. a 60 minute delay? That’s utter nonsense and completely unrealistic. No order goes into the market without financial clearing. Every trade is guaranteed, so again, nonsense. And as far as number 3, an actual problem is the shorting of shares without a locate first. people are able to short huge volumes of a stock without a locate, and that should be enforced.

      trading in milliseconds is not gambling. in today’s global markets where there are inefficiencies this type of trading is extremely profitable. is it bad? it might not be if regulated properly. The markets would be worse off without it as well, though.

      1. If, by “inefficiencies”, you mean some players take advantage of knowledge they have for a brief period before everyone knows, I’d say yes, that’s bad. That type of transaction is a zero sum game. Every nickel the player makes comes out of a less knowledgeable or less alert persons pocket. A pickpocket by any other name is still a pickpocket.

        I’ll concede an hour may be extreme, but before the ’70s transaction routinely took minutes, not milliseconds. Maybe a little moderation to gain some transparency would not be a terrible outcome. As far as selling only what you own and buying only what you can pay for being nonsense, it just seems sensible to me. Maybe I’m too conservative.

        1. by inefficiency, there is the type of trading that basically robs inexperienced investors in all manner of ways to be sure. but there is also natural inefficiencies that offer very lucrative opportunities. For example, equity arbs. A stock like nokia is traded in finland, sweden, germany, US, etc. You can put on positions in all in every country and leverage inefficiencies in equity values between countries. just think about how many natural inefficiencies exist in trading that kind of position. you have currencies- which is sloppy as fuk to begin with, networks on different continents in different timezones, different economies where you have situations like that nokia stock going up in the US but plummeting in Germany based not he same set of circumstances. And etc, etc, etc. I even use Nokia as an example because the stock could be a loser, there is still “opportunities”. And that is what professional trading is all about. opportunities. nothing more, less.. fuck charts, market cap, volatility, etc. but that’s a huge conversation that can’t possibly be had here.

          trading in the 70’s was all on paper the system existed as an equal playing field where transactions took longer for EVERYONE. that’s a key thing. trading is like any technology. everyone has to have the same technology for it to work. so when it advances everyone adopts it. or it wouldn’t work. again- a long philosophical/economic conversation, but that’s the gist of it.

    2. Wow, a delay of 60 minutes for a trade to execute would be a nightmare, even for people who don’t day trade. I think that is just a bit extreme.

  3. What about all the people who got stopped out of AAPL only to see the shares shoot right back up a short while later? Does the NASDAQ reinstate those stocks, returning them to their owners at the original price the owners paid?

    1. The article said that Nasdaq erased ALL the trades. We will never get those minutes back though. The real question is was it intentional malfeasance or just stupid/lazy programming. I am not sure it matters. I will no do business with this company.

  4. There are obviously some geniuses/experts here who understand this system better than some of us others (shinolashow), but I feel that the thinking of these geniuses/experts is essentially flawed. I have said before and will say again, there are no longer “stockholders” on Wall Street. There amoral opportunist, that is about all. It is why I don’t understand the purpose of Apple giving a dividend. “Stockholders”, people who invest and hold, they perhaps deserve something beside stock appreciation for their risk. But since so much of Apple stock is held by the amoral types, who are not “stockholders”, what is the purpose?

    1. Morality, or the absence of it, is just one of many issues. Besides, moral or not, a fair system attempts to hold everyone to a common set rules, regulations, and standards of conduct.

      The problem is that knowledge isn’t enough. Access is the name of the game in modern stock trading in which a few milliseconds can mean big profits, or big losses. A consortium of companies is in the process of routing a new fiberoptic cable across the Atlantic along a more efficient path that will cut miles of distance and a small fraction of a second off of intercontinental data transmissions. What justifies all of this cost for just a small time advantage? The same principle that applies to all stock, futures, and currency trading – first in, first out.

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