Anyone watching the close of the market last night will likely still be shaking off the hangover as we noted ‘the most ridiculous’ market movements occurred in the space of a few milliseconds. As ever, trusty investigator of all things ridiculous in equity markets, Nanex highlights a rather disturbing trend, now completed its third year, where volume compression simply breaks the market. On 11/30/11, quotes from Nasdaq suddenly stopped for about 20 seconds after another explosive close where multiple seconds worth of trading were jammed into the last second. However, trading at Nasdaq wasn’t affected. This is yet another example of where direct feeds illegally give data to one group of subscribers ahead of the consolidated feed. Clearly, the NBBO was ignored. For the last 3 years (2009, 2010, and 2011), there has been unusually high trading activity in the final minutes of trading activity on the last trading day in November. We show one example stock in detail below (SPY). Human discounting of a known rebalancing event? No. Completely ‘broken markets’ that are driven by self-reinforcing and chaos-reverting algos? Yes.
Note, green filled circles are FORM-T trades (after hours). Blue filled is the market closing print.