Analysis of the "Flash Crash"
Date of Event: 20100506
Part 2, Previous Occurrences
|If the quotes sent from the NYSE were stuck in a queue for transmission
only to be time stamped when exiting the queue, then all data inconsistencies
disappear and things make sense. In fact, this very situation occurred on 2
separate occasions at October 30, 2009, and again on January 28, 2010
as shown below.
Charting the bid/ask cross counts for those two days reveals the same pattern as 5/6! Looking at the details of the trade and quote data on those days shows the same time stamp/price inconsistencies. The NYSE stated that during the same intervals, they were experiencing delays in disseminating their quotes!
In summary, quotes from NYSE began to queue, but because they were time stamped after exiting the queue, the delay was undetectable to systems processing those quotes. The delay was small enough to cause the NYSE bid to be just slightly higher than the lowest offer price from competing exchanges. This caused sell order flow to route to NYSE -- thus removing any buying power that existed on other exchanges. When these sell orders arrived at NYSE, the actual bid price was lower because new lower quotes were still waiting to exit a queue for dissemination.
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