Some Flash Crashes on the BATS Exchange

Earlier today I partially read a WSJ article about the SEC looking in to HFTs (High Frequency Trading) on the premise they have an unfair advantage. Does the SEC really need to investigat to figure out if they have an unfair advantage? The HFTs have become the go to provider of liquidity, knocking specialists and market makers out of the game, with the one tiny problem. When a market crash occurs, the HFTs are not required to provide liquidty and can simply step out of the market, the now much marginalized traditional liquidity providers, the market makers on the NASDAQ and the Specialists on the NYSE may not have enough liquidity in stock being they have been so marginalized, they are the ONLY ONES by law who have to provide a bid and ask at all times at market.

I suppose it's a bit ironic then that on the day the SEC investigation is announced, AAPL sees one of these mini-flash crash tades on the BATS exchange, dropping to $548.50 nd halting the stock for 6 minutes.

Here's the mini-flash crash which some people think is the HFT's testing the market and others believe that the crash quote is where the market is headed, the predatory HFT programs do have a tactic called "Pinging for Icebergs", essentially looking for large institutional orders by a series of small pings at different price levels until they uncover a large order which they then front run. Whether this had anything to do with that, I don't know, but here's the action this morning in AAPL

The trade was at $542.80 seen above.

Next, BATS which went public today and only trades on the BATS exchange saw an even bigger flash crash from $15.75 to $0.038 !!!

It appears BATS has now requested order flow be re-routed, bypassing the BATS exchange.

Blame it on the SEC I guess!