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More On The Flash Crash From Nanex

6:57 pm in Uncategorized by masaccio

As I reported earlier, the CFTC-SEC report blames the flash crash on Waddell & Reed, which used a computer selling algorithm to sell 75,000 shares of e-mini futures contracts right at the beginning of the disaster. The chart on my post shows the impact of the flash crash on the Dow Jones Industrial Index. Now Zerohedge points to the latest from Nanex.

The report says that the algorithm that Waddell & Reed used was set to sell at the rate of 9% of the volume in the previous minute without regard to price or time. Nanex assumes that the algorithm worked, and plots out the relationship between Waddell & Reed trades and all other trades. This is the last graphic on the Nanex link above. Hmmmm.

As Zerohedge says:

And there you have it: W&R’s algo impact visualized based on a heuristical algo. In other words, according to the SEC, it is that barely visible blue wiggle that was responsible for a $1 trillion loss in market cap.

Clusterstock agrees that this is implausible. They point out that the retail investor took a real beating when the exchanges decided to limit the trades they would cancel to those more than 60% away from the last real price. The SEC is changing this procedure to make it more fair to small investors, but they will still take a beating. There are plenty of other examples of crazed algorithms. Here’s another catch by Zerohedge, and the explanation from a Nanex guy.  . . . Read the rest of this entry →

Who Can Obama Nominate To Head Up the Consumer Financial Protection Bureau?

9:00 am in Uncategorized by masaccio

Treasury Secretary Geithner doesn’t want Elizabeth Warren to head up the Consumer Financial Protection Bureau, created by the new financial reforms. As Shahien Nasiripour points out in the Huffington Post, Warren has called out Geithner on a number of issues, not least of which is the failure of Treasury to lead on the foreclosure problem.

President Obama can’t handle internal controversy, and what a battle it would be. On one side, the money boyz, Larry Summers (women are genetically unsuited for math), Geithner (Sheila Bair and Mary Schapiro are too serious about their jobs and not sufficiently impressed with the political skillz of the money boyz). On the other side, yet another woman more qualified by temperament, brains, determination, knowledge and skill than the money boyz. Geithner couldn’t bear having Warren describe his fetish for giant banks, the only people who might hire him after he exits the revolving door.

We know how that "battle" comes out: just look at Dawn Johnson. That means that Warren, who created the idea and has been its strongest proponent, is out as possible leader.

So, who can the President appoint who would be acceptable to the money boyz, and the administration’s buddies and potential massive contributors at the Business Roundtable? Herewith a list of possibles.

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