Boeing Shares Tumble 44% Before Exchanges Cancel Trades

[cbdo2007]

Boeing Shares Tumble 44% Before Exchanges Cancel Trades

By Whitney Kisling and Clyde Eltzroth - Jun 28, 2010

NYSE Euronext and Nasdaq OMX Group Inc. canceled trades that briefly sent shares of Boeing Co., the aircraft maker that’s one of thirty Dow Jones Industrial Average stocks, down 44 percent this morning.

The errant orders sent Chicago-based Boeing down to $38.77 at 7:14 a.m. New York time today from $68.77 at the end of last week, with 800 shares changing hands on NYSE Arca and 200 on Nasdaq. They fetched $68.50 in the next trade, at 8:06 a.m., and were at $68.01 as of 12:30 p.m.

While U.S. stock exchanges have implemented curbs to help prevent swings in the price of individual companies from causing another crash like the May 6 rout, they only apply after 9:45 a.m. New York time. Companies such as Accenture Plc, which now trades for $39.73, fell to 1 cent on May 6 as U.S. stocks lost $862 billion in value in less than 20 minutes.

“The bigger issue is making sure investors feel the market is safe for them to invest,” said Brett Mock, chairman of the Security Traders Association, a trade group based in Darien, Connecticut. “Obviously they need to make sure there’s uniform standards across the markets.”

http://www.bloomberg.com/news/2010-06-28/boeing-shares-tumble-as-much-as-44-before-rebounding-toward-friday-close.html

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More stock market irregularities. This is looking more and more troubling.

[TheWatcher]

1. So now when they don't like their Bubble Bursting, they'll just "cancel" all the "errant" trades

And make it all better.

Ahhhhh, The "Free Market" at work.

No more Triple Digit Drops in the Stock Market, nosiree.

"Oops. Do Over. Erase, Erase."

How can ANYBODY take this CASINO seriously as a functioning Market anymore?

I mean, come on. SERIOUSLY. PLEASE tell me we are NOT THIS STUPID.

[gratuitous]

2. They're making sure investors feel the market is safe

Okay, it isn't, but how are you gonna attract the rubes if they don't "feel" safe?

[TheWatcher]

5. The idea is to attract all the Rubes, trnasfer their wealth, and then keep the ill gotten, exploited

gains "safe".

It's a rigged game, and it has been for quite some time.

It's simply disgusting to see this relentless criminal romp just go on and on, and on and on, and nobody stops it.

How can you have a Real, Functioning Economy when everything is run like a Casino or a Back Room Numbers game?

[gratuitous]

8. But who would stop it? Us small people?

Because the Big Money Boyz think things are going just fine right now. They make a lot of money, strip Labor of its value, and then pluck the carcass before moving on to the next morsel. There isn't a problem as far as the predators are concerned. Well, maybe that some day they'll run out of prey, but that's way down the road, they've got all they need for life (and more), and lots of dutiful workers continuing to operate more and more productively for less and less money. Things could hardly be better for the guys with their hands on the wheel.

[TheWatcher]

9. In the end, that's exactly who MUST stop it. Because the people with their "hands on the wheel" do

not represent The Small People. They prey on them. And until We The People decide to stop being prey, prey is what we will be.

The amount of tyranny that people will receive is the exact amount that they will allow themselves to live under.

[DeschutesRiver]

19. I no longer participate in the stock market since it is acting like a casino.

If everyone did that, including pension funds for workers, the charade could not continue.

I don't think for a minute that most people who have retirement funds invested in stock will do the same, but that is what it would take - the small people whose money managed in large masses simply no longer participating. The big boyz are more content stripping money from the rest of us than they would be just ripping off each other.

[DJ13]

3. You've caught on to their game

Expect a knock on the door any moment.....

:hide:

[cbdo2007]

4. If you think this was a "bubble bursting" - did you not read the article?

Or are you unclear what "bubble bursting" means?

Either it is fraudulent transactions made by huge first such as Goldman Sachs that are just now receiving more scrutiny or they are technical glitches that need to be addressed. A stock going from $68 down to $38 and then back up to $68 however is not a "bubble bursting".

[TheWatcher]

16. "Fraudulent transactions made by huge first such as Goldman Sachs that are just now receiving more

scrutiny."

Oh, you are ADORABLE. :rofl:

Goldman Sachs and "scrutiny" are the last two words you will EVER see in a sentence together.

But, as has been said in this thread, this sets the perfect precedent for fraudulent thugs like Goldman Sachs.

When it's THEIR money being lost, it's a "glitch".

When it's ours, it's the "Free Market."

[Jennicut]

12. it sure looks like the world's biggest casino. Who trusts them anymore?

[ArcticFox]

14. Exactly - it's all a sham

They'll hit the "reset" button every time a "glitch" unexpectedly affects the big guys. Then one day the big guys will decide it's their time to cash out and will crash the market. Markets will fall and all the rest of us will be wondering why there is no "do-over" when our "wealth" has gone bye-bye.

[girl gone mad]

18. The lesson most small traders took from the "flash crash"?

Don't step in to provide support when the market is tanking, because your trades are just going to be reversed. Can't let any of the big guys lose a dime.

[gcomeau]

21. Is that a bad joke?

I'm sorry, but are you actually seriously suggesting the proper way for the market to function would have been for an 800 share trade to knock several billion dollars off the value of a company in seconds?

They were not "cancelling" the "errant" trades. They were cancelling the errant trades. Actual, real, screw-ups that had zero relation to reality. No quotation marks belong around those terms.

What the hell do you even think you're complaining about here? That people DIDN'T let the trading of a handful of shares manipulate billions of dollars worth of market cap? If they had let the trades stand THEN complain about not being able to trust the market... but how the hell you go off on a rant about them preventing that from happening escapes my comprehension.

FYI, they did the same thing 2 weeks ago when a handful of trades DOUBLED the value of Washington Post stock.... in one second flat. They were bogus, they got cancelled... as is entirely appropriate and called for.

[girl gone mad]

23. But they want it both ways.

All the momentum chasing hft was largely responsible for driving the markets up almost 60% on low volume.

The exchanges say it's fine as long as it's controlled enough to not cause any alarm. As soon as it gets away from them, they hit the kill switch and give everyone a do over. That's where the scam is. If they're going to cancel trades, they should start back in 2008, not simply pick and choose the ones that hurt the big firms most. If they're going to allow high frequency collocated computer trading, then the firms which run the algorithms should be exposed to losses when their programs do what they were programmed to do. They don't like it? Tough luck. All or nothing.

[gcomeau]

24. What?

There is a difference between a long slow run-up in value driven by actual real assessments that the trades are worth making... whether you personally agree with the valuation assessments the traders are making or not... and trades that are clearly so far out of left field that they cannot possibly be taken seriously.

Boeing did not suddenly lose 27 billion dollars of worth, in a few seconds, as determined by what looks like 1 guy selling a handful of shares at a price set in error. Which has absolutely nothing to do with allowing high frequency computer trading or algorithms or "whatever hurt the big firms the most" or anything else you're talking about.

And this event bears no relation whatsoever to a bubble forming in the market because shares become overvalued, which I can only assume is what you are complaining about when you say things should have been rolled back to 2008. This is a painfully obvious and easily identifiable technical *error*. Of course it had to be corrected. You can't apply the same logic to the entire market over a multi-year period just because it goes somewhere you don't think it's justified in going based on *real, legitimate, deliberate* trading activity by millions of people.

[unc70]

26. You and I seem the only posters here to actually understand what happened

I know of lots of ways to game the system, but this doesn't look like anything more than someone on the wrong row of the keypad (3 instead of 6) who did not verify their work. If this had been during main trading hours, it would have been noise corrected before anyone even noticed.

[Heywood J]

27. If an 800-share errant trade can ostensibly

knock billions of dollars off a company's value (enough to trigger protections and at 7AM), there's a bigger problem with the system and its valuation schemes.

800x$38.77 = $31,016
800x$68.50 = $54,800

Even if someone did accidentally sell his shares for $39 instead of $69, that means there would have only been 800 cheaply-priced Boeing shares on the market to buy (with the market not open yet). Other shareholders are not likely to panic and sell their shares at that low price, since they know it's probably a glitch and they paid a hell of a lot more than $39 for theirs. It's not like every Boeing share would suddenly sell for $39. How does that translate into a potential loss of billions of dollars, enough to cause a Mulligan? I smell a rat...

[gcomeau]

29. The market cap value of the company...

...is the share price times the number of shares. This is not that complicated. If the share price drops in half the companies market capitalization drops in half.

It is not just a matter of the value of the 800 shares traded. If the trades stand in a low volume trading environment then that becomes the current market price of ALL Boeing shares. Other people start jumping in and trading at those prices and you've just wiped out 25 billion dollars of value in Boeing stock.

And to be blunt, nobody is betting 25 billion dollars on traders being "not likely" to sell at the new price. SOMEONE is going to get in there and start selling there if things stay there too long witohut a proper priced trade re-correcting things. Some guy sutting in his apartment watching his e-trade account value suddenly nosedive, whatever. so you throw a circuit breaker, you tell everyone to stop, and you undo the erroneous trade to make SURE that doesn't happen.

[Heywood J]

31. But the question is then "why is the price of 800 shares the new price for all shares?"

If the stock went from $68 to $38, and that lost $40 represents $25B, that means Boeing had shares worth $42.5B outstanding before this happened. Why on Earth would any sane trader, exchange, or other entity revalue the remaining $42,499,950,000 worth of stock because someone mistakenly sold $50,000 worth of stock at that price (without any other news regarding the company)? What other people would just "start jumping in" to sell the stock they'd bought at $60+ for $38 just because of a computer glitch? That's a non-sequitur. Unless someone lost their head and did that, once the 800 shares were sold, there would be no more left at that price to buy, and the price would be back to the usual level. People offer different prices for shares all the time.

It also means that any tiny glitch like a typo can cause a major company to crash at any moment and require top-level intervention to stop it. That's not a sound system, no matter how you look at it. If we take the assertion that this typo would be the new actual share price as the undisputed truth, it would mean that stock prices bear no resemblance to the real state of the company, its real financial outlook, or any other reality-based factors, and are solely determined based on tiny typos and manipulation.


ETA: If these are the real rules of the game, then under this system, it's ridiculously easy to fuck up. If someone really wanted to cause a panic and screw the system, this would mean they could take seed money from some organization with like-minded goals, buy shares of many companies at the current price, then sell them for next to nothing. It would evidently cause a panic, destroy the market capitalization of the companies, trigger all the circuit breakers, and undo a whole lot of trades for the day. Basically, doing the same thing as happened with Boeing and on the $0.01 day, but claim innocence after that fact and that it was a typo to avoid prosecution. Financial terrorism made easy by the nature of the system, I guess.

[gcomeau]

32. Because the current market price of ALL shares...

...is the price at which they were last traded.

If the stock went from $68 to $38, and that lost $40 represents $25B, that means Boeing had shares worth $42.5B outstanding before this happened. Why on Earth would any sane trader, exchange, or other entity revalue the remaining $42,499,950,000 worth of stock because someone mistakenly sold $50,000 worth of stock at that price (without any other news regarding the company)?

Hence the crcuit breakers? And the cancelling of the trade at the obviously insane value?

[Nihil]

30. How dare you mention that elephant in the room?

Suckers The public need to "feel safe" about the casino!

[gcomeau]

33. Sigh...

Look, I'm sure as hell not arguing the market is "safe". But THIS has absolutely nothing to do with THAT. Trying to imply that the circuit break and cancelling of this trade has anything whatsoever to do with any "elephant in the room" is absurd.

[Nihil]

34. Look ...

... I'm following your patient arguments across different sub-threads
but can't you see the issue that I was trying (unsuccessfully) to highlight?

> It is not just a matter of the value of the 800 shares traded. If the trades
> stand in a low volume trading environment then that becomes the current market
> price of ALL Boeing shares. Other people start jumping in and trading at those
> prices and you've just wiped out 25 billion dollars of value in Boeing stock.

Right. The market panics (not just on Boeing but on any stock that "experts"
link to the success or otherwise of Boeing) ... because of an "erroneous trade".
A single event that causes a major flurry of activity to patch up.

("Single events" that happen every now & then FWIW.)


> so you throw a circuit breaker, you tell everyone to stop, and you undo the
> erroneous trade to make SURE that doesn't happen.

Thus "repairing" the house of cards until the next time ... as long as the
stock being accidentally wiped out is one that is considered important enough
rather than just being an opportunity to win from someone else's error (which
is the far more common case).


If you were to sell any other item you own for a fraction of the going price,
would anyone care? Would the buyer be made to return it? Is a stock clearance
sale ("Everything costs $1!") somehow intolerable depending on the details
rather than the action?

Why is this virtual gambling situation so different that it requires special
attention?

My answer to it is that such events highlight how false, how fake the whole
game really is - it is a scam to transfer wealth from the "outsiders" to the
"insiders" and it relies on lies ("confidence in the markets"), trickery
("ratings agencies", "circuit breakers") and con-men ("traders" in nonexistent
items, "market makers" who are paid to shake the cage a little and their
support environment whose sole purpose is personal profit).

Hence the "elephant in the room" issue.

:shrug:

[Poll_Blind]

6. Is this a repeat of the May 6th event?

Very troubling when the world's premier stock markets have to call Mulligans.

PB

[HereSince1628]

17. Ja, I think this is a repeart.

Unfortunately for me, the managers of my retirement account have included both Boeing and the Exchange :(

[Greyhound]

7. There's the real issue right there in a quote,

"The bigger issue is making sure investors feel the market is safe for them to invest," said Brett Mock, chairman of the Security Traders Association.

If they stop putting into the Ponzi scheme, it collapses.

[TheWatcher]

10. But you can see the precedent they are setting by claiming everything is a "glitch" or a "technical

issue."

I can see a day when ENTIRE DAYS of trading in the Market will be erased and done over.

"Oops. it was all a glitch. So sorry about that. See you tomorrow!"

The criminal romp never ends.

And even if there really ARE technical issues and glitches that cause this, what did they EXPECT, when such a large part of the entire Market itself is run by High Frequency, Algo-driven, Robot Trading Black Box nonsense?

Economy by Skynet.

Oh, this will end SO WELL.

[Greyhound]

13. And why participation must be mandated.

The whole tax deferment scam gives the lie about it being "your money". It's only "your money" when you do what we want you to do with it, otherwise it is still our money.

"They spend billions of dollars every year lobbying . . . lobbying, to get what they want . . . Well, we know what they want. They want more for themselves and less for everybody else, but I’ll tell you what they don’t want . . . they don’t want a population of citizens capable of critical thinking. They don’t want well informed, well educated people capable of critical thinking. They’re not interested in that . . . that doesn’t help them. That’s against their interests. That’s right. They don’t want people who are smart enough to sit around a kitchen table and think about how badly they’re getting fucked by a system that threw them overboard 30 fuckin' years ago. They don’t want that. You know what they want? They want obedient workers . . . Obedient workers, people who are just smart enough to run the machines and do the paperwork. And just dumb enough to passively accept all these increasingly shittier jobs with the lower pay, the longer hours, the reduced benefits, the end of overtime and vanishing pension that disappears the minute you go to collect it, and now they’re coming for your Social Security money. They want your fuckin' retirement money. They want it back so they can give it to their criminal friends on Wall Street, and you know something? They’ll get it . . . they’ll get it all from you sooner or later cause they own this fuckin' place. It’s a big club and you ain't in it"

George knew and spent his life telling us what we didn't want to hear.

[ArcticFox]

15. The wording of that quote is suspicious

The worry is how investors "feel" about the market's safety. Shouldn't the concern instead be to actualy make the markets safe?

[Greyhound]

22. Casinos are never safe for the rubes and the house always wins in the end.

I think that they are tipping to the fact that a lot of people wake up every time they run the crash-n-loot cycle and eventually they stop playing.

[nc4bo]

11. How unsettling - again.

So we now have a 2nd "accident"?

I don't invest and have no retirement dependent on the SM but if I did, the last thing I'd be feeling is that the stock market is a safe.

:tinfoilhat:

[unc70]

20. You can do this yourself, by accident or deliberately, trivially

All it takes to cause this kind of behavior is a simple, ordinary, online investment account almost anywhere. There are also simple explanations for why these are not a larger problem all the time.

In this case, Boeing was trading trading at just over 68. Someone using the electronic markets wanted to place a sell order for 1000 shares at roughly the market price of 68 and a fraction, but accidentally hit one key off on the keypad (3 vs 6) and entered 38 and the fraction. They carelessly missed the error and confirmed their sell order. Oops! It was quickly matched with two buy orders, then possibly could have triggered other actions based on market moves. Since it processed as two transactions rather than one, some of the protections appear to have failed.

In normal market hours, other trades pending in the market would usually obscure this type of mistake with other transactions filling the tape back near the original set-points. In a thinly traded instrument, or off-hours trading, the ability to manipulate for good and bad reasons is magnified.

If this scenario was the case today, I would question the brokerage screen not questioning quickly when entering a sell order that much below market. An extra "Really?" would seem in order, though I can imagine theoretically some event so destructive of the buy-side that the only way to liquidate ones position during a panic collapse might be to jump far ahead of the other sell orders. More common and less drastic, also less obvious, is selling shares a prices modestly below market could be part of a strategy by those short selling larger positions, in hopes of breaking market resistance at some price point. Despicable, but quite common.

Deliberate efforts to pre-position trading have been around since there have been markets. There are considerable efforts at the end of the trading day to manipulate the closing share prices, more often trying to make the last few trades be at higher prices than lower ones.

Another trick was to have a transaction go out on the tape/ticker, then send a correction a short time later. The fraud systems are wise to such manipulation.

Commodity prices, FX, and interest rates have similar issues.

[AnArmyVeteran]

35. Good post!

[onethatcares]

25. the bigger issue is making sure the suckers feel it's safe to

put their dollars on three card monte all the time.

can we make them play with monopoly money instead of our social security?

[Odin2005]

28. More proof Wall Street is a fucking CASINO.