The Flash Crash report is out...finally.
What sticks out:
1) it reads like a wonky memo to SEC Chief Mary Schapiro and CFTC Chief Gary Gensler from their staffs, which is exactly what it is.
2) there is no list of "action items" — no joint cover letter from Schapiro and Gensler saying, "Thank you, staff, for your excellent report, and based on upon your information we are going to move forward with the following items: (list)."
The answer seems to be that this will be submitted to the joint advisory committee for their consideration. But this was a high-profile report and the public is looking for what, if any, action the SEC should be taking.
What they conclude is that there were two CAUSATIVE FACTORS:
1) concern over the stability of Europe (the report calls it "an unusually turbulent day for the market")
2) the sale of a huge ($4.1 billion) e-Mini futures contract at 2:32pm ET. The great irony is that this sale was NOT done by a high frequency trading firm, it was (reportedly) done by Waddell & Reed.
There were also two EXACERBATING FACTORS:
1) the lack of uniform circuit breakers;
2) a slowdown in the consolidated tape which influenced the action of traders (it caused them to question the accuracy of the tape, which resulted in some halting trading).
Here is a curious omission: the SEC and CFTC did not ask the obvious question to the firm who did this $4.1 billion sale:
"What the hell were you thinking? The market is down several hundred points and you dump this ENORMOUS sell order into the market, using an algorithm that executes the sale in the absurd time of about 20 minutes. Did you have no thought that this would cause an enormous drop in prices?"
I am told they did ask, but were prohibited from revealing to us exactly what they said. Huh?
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