Something wicked , this way comes........ And it getting closer.......

Cyber warfare.... just a recap from my earlier post but this ties into what's is occurring around us presently..... some additional information dropped above the top of the prior post....

Reuters' Matthew Keys indicted for conspiring with hacker group 'Anonymous'

March 14, 2013

Print Version

Matthew Keys, a deputy social media editor at Thomson Reuters, has been charged in a federal indictment for allegedly conspiring with members of the hacker group “Anonymous” to hack into a Tribune Company website, the Justice Department announced today.

Keys, a former web producer for the Tribune Co-owned television station KTXL FOX 40, in Sacramento, Calif., was charged with providing members of the group with log-in credentials for a computer server belonging to the Tribune Co., according to the DoJ's press release.

"According to the indictment, Keys identified himself on an Internet chat forum as a former Tribune Company employee and provided members of Anonymous with a login and password to the Tribune Company server," the DoJ press release reads. "After providing log-in credentials, Keys allegedly encouraged the Anonymous members to disrupt the website. According to the indictment, at least one of the computer hackers used the credentials provided by Keys to log into the Tribune Company server, and ultimately that hacker made changes to the web version of a Los Angeles Times news feature."

Read More...

http://rt.com/usa/secret-service-fbi-exposed-hackers-220/

Secret Service and FBI investigating leaked Obama financial records

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Published time: March 13, 2013 19:27

U.S. first lady Michelle Obama. (AFP Photo / Alex Wong)

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More Prominent Credit Reports Leaked As Agencies Explain How Hackers Did It

Michael Kelley | 54 minutes ago | 594 | 2

On Monday a website published credit reports containing sensitive personal identifying information of 15 public figures including Michelle Obama, Hillary Clinton, Joe Biden, Jay-Z, And Arnold Schwarzenegger.

On Tuesday — as the site published three more names — the three biggest U.S. credit-reporting companies confirmed the leak and explained how cybercriminals impersonated the victims to pull it off, Jordan Robertson of Bloomberg reports.

A spokesman for TransUnion Corp. said hackers accessed the credit histories using "social-security numbers and other sensitive, personal identifying information" they already had from other sources.

It looks like the president may be getting involved as he has selected CEOs into White House Situation Room to discuss cybersecurity threats.

Pres Obama plans Wednesday Situation Room meeting with CEOs to discuss cyber security concerns.

11:59 PM - 12 Mar 13

From CBS News White House Correspondent Peter Maer:

Can't recall non govt. types invited to meeting in Situation Room. Pres. Obama & biz execs to discuss "efforts to address cyber threat."

12:14 AM - 13 Mar 13

Robertson notes that the website disclosed TransUnion credit reports on First lady Michelle Obama, FBI director Robert Mueller, Mel Gibson, Ashton Kutcher, Beyoncé Knowles, and Hulk Hogan.

Equifax Inc. credit reports on U.S. Attorney General Eric Holder; LAPD Chief Charlie Beck, Jay-Z, former U.S. Vice President Al Gore, and former California governor Arnold Schwarzenegger in addition to a Experian Plc credit report on Paris Hilton were also leaked.

Credit reports on Sarah Palin, Kim Kardashian, Kanye West, Kris Jenner, and Britney Spears as well as personal information of Donald Trump also appeared on the site.

The website has a .su country code, which was originally created for the Soviet Union in 1990 and persisted after its dissolution in 1991. The website's Twitter page (now suspended) contained what Russia Today called "bad Russian."

Read more: http://www.businessinsider.com/how-hackers-steal-credit-reports-2013-3#ixzz2NNguRIkg

http://fredw-catharsisours.blogspot.com/2013/03/cyber-war-updates-bad-al-qaeda-not.html

Monday, March 11, 2013

Cyber War updates - Bad Al Qaeda ( Not Syrian or Libyan islamists ) alleged to be working with China and Tunisia to hack US Government websites.... Bank of Australia hacked before last Fall's G- 20 meetings...... China calls for end to Cyber War - another of confirming they are hacking the US like mad.....

http://www.washingtonpost.com/world/national-security/pentagon-creating-teams-to-launch-cyberattacks-as-threat-grows/2013/03/12/35aa94da-8b3c-11e2-9838-d62f083ba93f_story.html

( Pentagon will need to hire cracker jack hackers and a lot faster than this - if the cyber threat is real and not memorex..... )

Pentagon creating teams to launch cyberattacks as threat grows

By Ellen Nakashima, Updated: Tuesday, March 12, 4:44 PM

The Pentagon’s Cyber Command will create 40 offensive cyber-teams by the fall of 2015 to help defend the nation against major computer attacks and assist combat commands as they plan offensive capabilities, Gen. Keith Alexander testified to Congress on Tuesday.

The new teams are part of a broader government effort to shield the nation from destructive attacks over the Internet that could harm Wall Street or knock out electric power, for instance.

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Some teams are already in place, he said, to focus on “the most serious threats,” which he did not identify.

But Alexander warned that budget cuts will undermine the effort to build up these forces even as foreign threats to the nation’s critical computer systems intensify. And he urged Congress to pass legislation to enable the private sector to share computer threat data with the government without fear of being sued.

As he moves into his eighth year as director of the National Security Agency and his third year as head of the fledgling Cyber Command, Alexander told the Senate Armed Services Committee that the strategic threat picture is worsening. “We’ve seen the attacks on Wall Street over the last six months grow significantly,” he said, noting there were more than 160 disruptive attacks on banks in that period.

Describing an attack on Saudi Arabia’s national oil company, he said: “Last summer, in August, we saw a destructive attack on Saudi Aramco, where the data on over 30,000 systems were destroyed. And if you look at industry, especially the anti-virus community and others, they believe it’s going to grow more in 2013. And there’s a lot that we need to do to prepare for this. “

The U.S. intelligence community has indicated that the assaults on the banks and Saudi Aramco were the work of Iran in retaliation for U.S. financial sanctions imposed to deter Iran from pursuing a nuclear weapons program.

Alexander’s remarks came as U.S. intelligence officials elsewhere on the Hill testified about the growing cyberthreat. At a national security threat hearing, Director of National Intelligence James R. Clapper Jr. called on China to stop its “cyber-stealing”of corporate secrets from U.S. networks.

Alexander said that 13 of the new cyber-teams would defend against destructive attacks. “I would like to be clear that this team . . . is an offensive team,” he said, in a rare admission that the military has developed the capacity to conduct offensive cyberattacks.

The other 27 teams would support commands such as Pacific Command and Central Command as they plan offensive cyber-capabilities. Separate teams would focus on protecting the Defense Department’s computer networks. He said the first third of the forces, which officials have said will total several thousand civilians and uniformed personnel, will be in place by September and the second third a year later.

But Alexander said uncertainty over the budget is having an impact on the ability to fill out the teams. About 25 percent of Cyber Command’s budget is being held up by congressional wrangling over the fiscal 2013 budget, he said. And across-the-board budget cuts that took effect March 1 are forcing civilian furloughs. “By singling out the civilian workforce, we’ve done a great disservice,” said Alexander, noting that one-third of the command workforce is made up of Air Force civilians.

He said that some cyber-recruits have taken a salary cut to work for the government, only to be faced with a furlough. “That’s the wrong message to send people we want to stay in the military acting in these career fields.”

The attacks hitting the banks are “distributed denial of service attacks” — or barrages of network traffic against Web site servers — that are best handled by the Internet service providers, he said. The issue is “when does a nuisance become a real problem” that forces the government to act, he said. The administration is debating that now, he said.

To detect major attacks on industry, the department needs to see them coming in real time, Alexander said. The Internet service providers are best positioned to provide that visibility, but they lack the authority to share attack data with the government, he said. In particular, he said, the companies need legal protection against lawsuits for sharing the data.

and......

DoD Plans to Use Preemptive Deadly Force on Hackers, Cyber Threats

March 12, 2013

Print Version

Freda Art

Eric Blair

Activist Post

A new report from the Department of Defense outlines the military's capability to deter cyber threats with some pretty heavy firepower, including nuclear weapons.

The paper written by the Defense Science Board described the best types of bombs to use on hackers to be "Global selective strike systems e.g. penetrating bomber, submarines with long range cruise missiles, Conventional Prompt Global Strike (CPGS), survivable national and combatant command," while "Nuclear weapons would remain the ultimate response and anchor the deterrence ladder" for cyber threats.

"The report ... implies that the United States might have to rely on nuclear weapons to retaliate after a large-scale cyber attack," Foreign Policy writes.

Although it seems that Foreign Policy is reporting shocking revelations, they're actually engaged in subtle misinformation. They claim that this strike capability is only to be used in "retaliation" after a cyber attack as opposed to preemptive strikes to prevent cyber threats, which the military is already authorized to do.

For all the talk of the indefinite detention section of the National Defense Authorization Act (NDAA), a little known provision gave President Obama the authority to "conduct offensive operations in cyberspace".

Here's what Section 954 of the 2011 NDAA says:

SEC. 954. MILITARY ACTIVITIES IN CYBERSPACE.

Congress affirms that the Department of Defense has the capability, and upon direction by the President may conduct offensive operations in cyberspace to defend our Nation, Allies and interests, subject to—

(1) the policy principles and legal regimes that the Department follows for kinetic capabilities, including the law of armed conflict; and

(2) the War Powers Resolution (50 U.S.C. 1541 et seq.).

Prior to this NDAA provision, in July 2011, the Pentagon announced cyberspace to be their "operational domain" and claimed that the U.S. can "under the laws of armed conflict, respond to serious cyber attacks with a proportional and justified military response at the time and place of our choosing," said Deputy Defense Secretary William Lynn during the release of The Department of Defense Strategy for Operating in Cyberspace.

This week we heard Rand Paul speak much about the "law of armed conflict" or "Martial Law" in his talking filibuster of John Brennan over drone strikes on American soil, which is a related concern since the NDAA also officially labeled the U.S. as part of the battlefield.

Paul reiterated that if Americans can be treated the same as an enemy under the law of armed conflict, there is no due process protection, as well as more flexible rules of engagement than those that restrict the police. Just ask the Guantanamo prisoners or Bradley Manning how due process works under the laws of war. Or ask the family of the 16-year-old American murdered by a targeted drone strike about the rules of engagement.

Therefore due process will not be needed to take offensive action against cyber threats under the laws of war. In other words, hackers everywhere may be facing a lethal force if they're suspected of engaging in cyber attacks against the U.S. or its allies and interests.

The report, however, urges US military leaders to develop "cyber escalation scenarios and red lines" that could prompt the use of force. Or simply put, when can they pull the trigger on a cyber threat. Of course, just as the legal justification for drone strikes has remained classified, surely, this will as well.

Here is a nifty illustration they provided to help us visualize how the threat levels are designed for hackers:

It's also important to note that the military has been authorized to conduct a cyberwar with "kinetic capabilities", meaning it can operate wherever the threat is in the world. A borderless war like the war on terror. This eliminates any need for the President to seek an individual declaration of cyber war against China in Congress even though nuclear weapons could potentially be involved.

Does anyone in Congress understand just how dangerous it is to authorize the use of preemptive deadly force against cyber threats without due process?

http://www.zerohedge.com/news/2013-03-12/chasecom-hacked

Chase.com Hacked?

Submitted by Tyler Durden on 03/12/2013 16:30 -0400

Joe Biden

Attempts to access chase.com: the depository arm of JPMorgan, and the bank whose gold vault, the biggest in the world, is located right next to that of the NY Fed, lead to website sightings such as this. Was JPM also just hacked, following the personal hackingof such high profile individuals as Michelle Obama, Joe Biden and Jay Z?

Hopefully the below is safer than the above...

* * *

Does the bond market go boom soon ? Some say yes.....

http://beforeitsnews.com/financial-markets/2013/03/worlds-biggest-ponzi-scheme-induced-by-ben-bernanke-is-getting-ready-to-explode-2520090.html

Casey Research: An update on the coming “bond market crash”

This Ponzi scheme is getting ready to explode…
From Bud Conrad, Chief Economist, Casey Research:
It is my contention that the 70-year debt supercycle has come to an end.
To put the current financial situation in perspective, here’s a long-term history of the debt-to-GDP ratio, which reached a record high at the beginning of the current crisis. It was a dramatic change in 2009, unlike anything since the aftermath of the Great Depression.

The highest the debt-to-GDP ratio had previously been for the United States was 301% at the bottom of the depression in 1933 when GDP collapsed and debt was high. The level became unsustainable in 2009, despite low interest rates. Weak borrowers were signing up to finance houses that they thought would increase in price forever. The point of the chart is that this downturn is different from all the recessions since World War II.

Total market debt includes debt of the federal government, state governments, households, business, financial institutions, and to foreigners. The components of the above total debt are shown below, so you can see which ones are stabilizing and which may be approaching unsustainable levels.

Looking forward, the most important problem is…

Peter Schiff- Ben Bernanke’s Stimulus Induced Temporary High- World’s Biggest Ponzi Scheme

* * *

http://beforeitsnews.com/survival/2013/01/dhs-insider-report-coming-this-spring-life-for-the-average-american-is-going-to-change-significantly-6-2455740.html?currentSplittedPage=0

DHS Insider Report: Coming This Spring: “Life for the Average American is Going to Change Significantly”

Monday, January 7, 2013 0:50

SHTFplan Editor’s Note: The following interview is both informative and terrifying, and essential reading for anyone concerned about what comes next.

What the DHS Insider suggests is about to happen is exactly what many of us fear – a police state takeover of America, with urban centers to be pacified first, all outspoken critics of the government to be silenced, and travel restrictions across the United States to come shortly thereafter.

The dollar collapse, riots, the mobilization of domestic law enforcement, gun control, rationing of food and gas, suspension of the U.S. Constitution and a complete lock-down of America as we know it. According to the report, sinister forces within the U.S. government operating at the highest levels of our country’s political, financial, intelligence and military hierarchies have set into motion a series of events that will leave the populace so desperate for government intervention that they’ll willingly surrender their liberty for the perceived security of a militarized police state.

Interviewer Doug Hagmann cites an anonymous source operating deep inside the Department of Homeland Security, which may leave many skeptical of the accuracy of the reports. But the fact is, were such events being planned behind the scenes we certainly wouldn’t be given official mainstream warning. If real, the report is a game changer, and it makes sense that anyone privy to such information would want to keep their identity hidden. Whistle blowers in America who expose the corruption of officials in our government are treated not as patriots, but as traitors, and are often branded as psychos or terrorists.

What’s most alarming is the speed at which these events may play out.

The latest from “DHS Insider”
(This is the complete interview from The Hagmann and Hagmann Report)

Introduction

23 December 2012: After a lengthy, self-imposed informational black-out, my high-level DHS contact known as “Rosebud” emerged with new, non-public information about plans being discussed and prepared for implementation by the Department of Homeland Security (DHS) in the near future. It is important to note that this black-out was directly related to the aggressive federal initiative of identifying and prosecuting “leakers,” at least those leaks and leakers not sanctioned by the executive office – the latter of which there are many.

Due to those circumstances, my source exercised an abundance of caution to avoid compromising a valuable line of communication until he had information he felt was significant enough to risk external contact. The following information is the result of an in-person contact between this author and “Rosebud” within the last 48 hours. With his permission, the interview was digitally recorded and the relevant portions of the contact are provided in a conversational format for easier reading. The original recording was copied onto multiple discs and are maintained in secure locations for historical and insurance purposes.

Meeting

The following began after an exchange of pleasantries and other unrelated discussion:

DH: Do I have your permission to record this conversation?

RB: You do.

DH: I’ve received a lot of e-mail from people wondering where you went and why you’ve been so quiet.

RB: As I told you earlier, things are very dicey. Weird things began to happen before the election and have continued since. Odd things, a clampdown of sorts. I started looking and I found [REDACTED AT THE REQUEST OF THIS SOURCE], and that shook me up. I’m not the only one, though, that found a [REDACTED], so this means there’s surveillance of people within DHS by DHS. So, that explains this cloak and dagger stuff for this meeting.

DH: I understand. What about the others?

RB: They are handling it the same way.

DH: I’ve received many e-mails asking if you are the same person giving information to Ulsterman. Are you?

RB: No, but I think I know at least one of his insiders.

DH: Care to elaborate?

RB: Sorry, no.

DH: Do you trust him or her. I mean, the Ulsterman source?

RB: Yes.

DH: Okay, so last August, you said things were “going hot.” I printed what you said, and things did not seem to happen as you said.

RB: You’d better recheck your notes and compare [them] with some of the events leading up to the election. I think you’ll find that a full blown campaign of deception took place to make certain Obama got back into office. The polls, the media, and a few incidents that happened in the two months before the election. I guess if people are looking for some big event they can point to and say “aha” for verification, well then I overestimated people’s ability to tell when they are being lied to.

DH: What specific incidents are you referring to?

RB: Look at the threats to Obama. Start there. The accusations of racism. Then look at the polls, and especially the judicial decisions about voter ID laws. Bought and paid for, or where there was any potential for problems, the judges got the message, loud and clear. Then look at the voter fraud. And not a peep from the Republicans. Nothing. His second term was a done deal in September. This was planned. Frankly, the Obama team knew they had it sewn up long before election day. Benghazi could have derailed them, but the fix was in there, so I never saw anything on my end to suggest a ready-made solution had to be implemented.

DH: What’s going on now?

RB: People better pay close attention over the next few months. First, there won’t be any meaningful deal about the fiscal crisis. This is planned, I mean, the lack of deal is planned. In fact, it’ necessary to pave the way for what is in the short term agenda.

DH: Wait, you’re DHS – not some Wall Street insider.

RB: So you think they are separate agendas? That’s funny. The coming collapse of the U.S. dollar is a done deal. It’s been in the works for years – decades, and this is one of the most important cataclysmic events that DHS is preparing for. I almost think that DHS was created for that purpose alone, to fight Americans, not protect them, right here in America. But that’s not the only reason. There’s the gun issue too.

DH: So, what are you seeing at DHS?

RB: We don’t have a lot of time, tonight – our meeting – as well as a country. I mean I have heard – with my own ears – plans being made that originate from the White House that involve the hierarchy of DHS. You gotta know how DHS works at the highest of levels. It’s Jarrett and Napolitano, with Jarrett organizing all of the plans and approaches. She’s the one in charge, at least from my point of view, from what I am seeing. Obama knows that’s going on and has say, but it seems that Jarrett has the final say, not the other way around. It’s [screwed] up. This really went into high gear since the election.

But it’s a train wreck at mid management, but is more effective at the lower levels. A lot of police departments are being gifted with federal funds with strings attached. That money is flowing out to municipal police departments faster than it can be counted. They are using this money to buy tanks, well, not real tanks, but you know what I mean. DHS is turning the police into soldiers.

By the way, there has been a lot of communication recently between Napolitano and Pistole [TSA head]. They are planning to use TSA agents in tandem with local police for certain operations that are being planned right now. This is so [deleted] important that you cannot even begin to imagine. If you get nothing else out of this, please, please make sure you tell people to watch the TSA and their increasing involvement against the American public. They are the stooges who will be the ones to carry out certain plans when the dollar collapses and the gun confiscation begins.

DH: Whoa, wait a minute. You just said a mouthful. What’s the agenda here?

RB: Your intelligence insider – he knows that we are facing a planned economic collapse. You wrote about this in your articles about Benghazi, or at least that’s what I got out of the later articles. So why the surprise?

DH: There’s a lot here. Let’s take it step by step if you don’t mind.

RB: Okay, but I’m not going to give it to you in baby steps. Big boy steps. This is what I am hearing. Life for the average American is going to change significantly, and not the change people expect. First, DHS is preparing to work with police departments and the TSA to respond to civil uprisings that will happen when there is a financial panic. And there will be one, maybe as early as this spring, when the dollar won’t get you a gumball. I’m not sure what the catalyst will be, but I’ve heard rumblings about a derivatives crisis as well as an oil embargo. I don’t know, that’s not my department. But something is going to happen to collapse the dollar, which has been in the works since the 1990′s. Now if it does not happen as soon as this, it’s because there are people, real patriots, who are working to prevent this, so it’s a fluid dynamic. But that doesn’t change the preparations.

And the preparations are these: DHS is prepositioning assets in strategic areas near urban centers all across the country. Storage depots. Armories. And even detainment facilities, known as FEMA camps. FEMA does not even know that the facilities are earmarked for detainment by executive orders, at least not in the traditional sense they were intended. By the way, people drive by some of these armories everyday without even giving them a second look. Commercial and business real estate across the country are being bought up or leased for storage purposes. Very low profile.

Anyway, I am hearing that the plan from on high is to let the chaos play out for a while, making ordinary citizens beg for troops to be deployed to restore order. but it’s all organized to make them appear as good guys. That’s when the real head knocking will take place. We’re talking travel restrictions, which should no be a problem because gas will be rationed or unavailable. The TSA will be in charge of travel, or at least be a big part of it. They will be commissioned, upgraded from their current status.

They, I mean Jarrett and Obama as well as a few others in government, are working to create a perfect storm too. This is being timed to coincide with new gun laws.

DH: New federal gun laws?

RB: Yes. Count on the criminalization to possess just about every gun you can think of. Not only restrictions, but actual criminalization of possessing a banned firearm. I heard this directly from the highest of my sources. Plans were made in the 90′s but were withheld. Now, it’s a new day, a new time, and they are riding the wave of emotion from Sandy Hook., which, by the way and as tragic as it was, well, it stinks to high heaven. I mean there are many things wrong there, and first reports are fast disappearing. The narrative is being changed. Look, there is something wrong with Sandy Hook, but if you write it, you’ll be called a kook or worse.

DH: Sure

RB: But Sandy Hook, there’s something very wrong there. But I am hearing that won’t be the final straw. There will be another if they think it’s necessary.

DH: Another shooting?

RB: Yes.

DH: That would mean they are at least complicit.

RB: Well, that’s one way of looking at it.

DH: Are they? Were they?

RB: Do your own research. Nothing I say, short of bringing you photographs and documents will convince anyone, and even then, it’s like [DELETED] in the wind.

DH: So…

RB: So what I’m telling you is that DHS, the TSA and certain, but not all, law enforcement agencies are going to be elbow deep in riot control in response to an economic incident. At the same time or close to it, gun confiscation will start. It will start on a voluntary basis using federal registration forms, then an amnesty, then the kicking-in of doors start.

Before or at the same time, you know all the talk of lists, you know, the red and blue lists that everyone made fun of? Well they exist, although I don’t know about their colors. But there are lists of political dissidents maintained by DHS. Names are coordinated with the executive branch, but you know what? They did not start with Obama. They’ve been around in one form or another for years. The difference though is that today, they are much more organized. And I’ll tell you that the vocal opponents of the politics of the global elite, the bankers, and the opponents of anything standing in their way, well, they are on the top of the list of people to be handled.

DH: Handled?

RB: As the situations worsen, some might be given a chance to stop their vocal opposition. Some will, others won’t. I suppose they are on different lists. Others won’t have that chance. By that time, though, it will be chaos and people will be in full defensive mode. They will be hungry, real hunger like we’ve never experienced before. They will use our hunger as leverage. They will use medical care as leverage.

DH: Will this happen all at once?

RB: They hope to make it happen at the same time. Big cities first, with sections being set apart from the rest of the country. Then the rural areas. There are two different plans for geographical considerations. But it will all come together.

DH: Wait, this sounds way, way over the top. Are you telling me… [Interrupts]

RB: [Over talk/Unintelligible] …know who was selected or elected twice now. You know who his associates are. And you are saying this is way over the top? Don’t forget what Ayers said – you talked to Larry Grathwohl. This guy is a revolutionary. He does not want to transform our country in the traditional sense. He will destroy it. And he’s not working alone. He’s not working for himself, either. He has his handlers. So don’t think this is going to be a walk in the park, with some type of attempt to rescue the country. Cloward-Piven. Alinsky. Marx. All rolled into one. And he won’t need the rest of his four years to do it.

DH: I need you to be clear. Let’s go back again, I mean, to those who speak out about what’s happening.

RB: [Edit note: Obviously irritated] How much clearer do you want it? The Second Amendment will be gone, along with the first, at least practically or operationally. The Constitution will be gone, suspended, at least in an operational sense. Maybe they won’t actually say that they are suspending it, but will do it. Like saying the sky is purple when it’s actually blue. How many people will look a the sky and say yeah, it’s purple? They see what they want to see.

So the DHS, working with other law enforcement organizations, especially the TSA as it stands right now, will oversee the confiscation of assault weapons, which includes all semi-automatic weapons following a period of so-called amnesty. It also includes shotguns that hold multiple rounds, or have pistol grips. They will go after the high capacity magazines, anything over, say 5 rounds.

They will also go after the ammunition, especially at the manufacturer’s level. They will require a special license for certain weapons, and make it impossible to own anything. More draconian than England. This is a global thing too. Want to hunt? What gives you the right to hunt theiranimals? Sound strange? I hope so, but they believe they own the animals. Do you understand now, how sick and twisted this is? Their mentality?

The obvious intent is to disarm American citizens. They will say that we’ll still be able to defend ourselves and go hunting, but even that will be severely regulated. This is the part that they are still working out, though. While the plans were made years ago, there is some argument over the exact details. I know that Napalitano, even with her support of the agenda, would like to see this take place outside of an E.O. [Executive Order] in favor of legislative action and even with UN involvement.

DH: But UN involvement would still require legislative approval.

RB: Yes, but your still thinking normal – in normal terms. Stop thinking about a normal situation. The country is divided, which is exactly where Obama wants us to be. We are as ideologically divided as we were during the Civil War and that rift is growing every day. Add in a crisis – and economic crisis – where ATM and EBT cards will stop working. Where bank accounts will contain nothing but air. They are anticipating a revolution and a civil war rolled into one (emphasis added by this author).

Imagine when talk show hosts or Bloggers or some other malcontent gets on the air or starts writing about the injustice of it all, and about how Obama is the anti-Christ or something. They will outlaw such talk or writing as inciting the situation – they will make it illegal by saying that it is causing people to die. The Republicans will go along with everything as it’s – we have – a one party system. Two parties is an illusion. It’s all so surreal to talk about but you see where this is headed, right?

DH: Well, what about the lists?

RB: Back to that again, okay. Why do you think the NSA has surveillance of all communications? To identify and stop terrorism? Okay, to be fair, that is part of it, but not the main reason. The federal agencies have identified people who present a danger to them and their agendas. I don’t know if they are color coded like you mentioned, red blue purple or peach mango or whatever, but they exist. In fact, each agency has their own. You know, why is it so [deleted] hard for people to get their heads around the existence of lists with names of people who pose a threat to their plans? The media made a big deal about Nixon’s enemies list and everyone nodded and said yeah, that [deleted], but today? They’ve been around for years and years.

DH: I think it’s because of the nature of the lists today. What do they plan to do with their enemies?

RB: Go back to what Ayers said when, in the late 60′s? 70′s? I forget. Anyway, he was serious. But to some extent, the same thing that happened before. They – the people on some of these lists – are under surveillance, or at least some, and when necessary, some are approached and made an offer. Others, well, they can be made to undergo certain training. Let’s call it sensitivity training, except on a much different level. Others, most that are the most visible and mainstream are safe for the most part. And do you want to know why? It’s because they are in the pockets of the very people we are talking about, but they might or might not know it. Corporate sponsorship – follow the money. You know the drill. You saw it happen before, with the birth certificate.

It’s people that are just under the national radar but are effective. They have to worry. Those who have been publicly marginalized already but continue to talk or write or post, they are in trouble. It’s people who won’t sell out, who think that they can make a difference. Those are the people who have to worry.

Think about recent deaths that everybody believes were natural or suicides. Were they? People are too busy working their [butts] off to put food on the table to give a damn about some guy somewhere who vapor locks because of too many doughnuts and coffee and late nights. And it seems plausible enough to happen. This time, when everything collapses, do you think they will care if it is a bullet or a heart attack that takes out the opposition? [Deleted] no.

DH: That’s disturbing. Do you… [interrupts]

RB: Think about the Oklahoma City bombing in ’95. Remember how Clinton blamed that on talk radio, or at least in part. Take what happened then and put it in context of today. Then multiply the damnation by 100, and you will begin to understand where this is going. People like Rush and Hannity have a narrow focus of political theater. They’ll still be up and running during all of this to allow for the appearance of normal. Stay within the script, comrade.

But as far as the others, they have certain plans. And these plans are becoming more transparent. They are getting bolder. They are pushing lies, and the bigger the lie, the easier it is to sell to the people. They will even try to sell a sense of normalcy as things go absolutely crazy and break down. It will be surreal. And some will believe it, think that it’s only happening in certain places, and we can draw everything back once the dust settles. But when it does, this place will not be the same.

DH: Will there be resistance within the ranks of law enforcement? You know, will some say they won’t go along with the plan, like the Oath Keepers?

RB: Absolutely. But they will not only be outnumbered, but outgunned – literally. The whole objective is to bring in outside forces to deal with the civil unrest that will happen in America. And where does their allegiance lie? Certainly not to Sheriff Bob. Or you or me.

During all of this, and you’ve got to remember that the dollar collapse is a big part of this, our country is going to have to be redone. I’ve seen – personally – a map of North America without borders. Done this year. The number 2015 was written across the top, and I believe that was meant as a year. Along with this map – in the same area where this was – was another map showing the United States cut up into sectors. I’m not talking about what people have seen on the internet, but something entirely different. Zones. And a big star on the city of Denver.

Sound like conspiracy stuff on the Internet? Yup. But maybe they were right. It sure looks that way. It will read that way if you decide to write about this. Good luck with that. Anyway, the country seemed to be split into sectors, but not the kind shown on the internet. Different.

DH: What is the context of that?

RB: Across the bottom of this was written economic sectors. It looked like a work in progress, so I can’t tell you any more than that. From the context I think it has to do with the collapse of the dollar.

DH: Why would DHS have this? I mean, it seems almost contrived, doesn’t it?

RB: Not really, when you consider the bigger picture. But wait before we go off into that part. I need to tell you about Obamacare, you know, the new health care coming up. It plays a big part – a huge [deleted] part in the immediate reshaping of things.

DH: How so?

RB: It creates a mechanism of centralized control over people. That’s the intent of this monster of a bill, not affordable health care. And it will be used to identify gun owners. Think your health records are private? Have you been to the doctor lately? Asked about owning a gun? Why do you think they ask, do you think they care about your safety? Say yes to owning a gun and your information is shared with another agency, and ultimately, you will be identified as a security risk. The records will be matched with other agencies.

You think that they are simply relying on gun registration forms? This is part of data collection that people don’t get. Oh, and don’t even think about getting a script for some mood enhancement drug and being able to own a gun.

Ayers and Dohrn are having the times of their lives seeing things they’ve worked for all of their adult lives actually coming to pass. Oh, before I forget, look at the recent White House visitor logs.

DH: Why? Where did that come from?

RB: Unless they are redacted, you will see the influence of Ayers. Right now. The Weather Underground has been reborn. So has their agenda.

DH: Eugenics? Population control?

RB: Yup. And re-education camps. But trust me, you write about this, you’ll be called a kook. It’s up to you, it’s your reputation, not mine. And speaking about that, you do know that this crew is using the internet to ruin people, right? They are paying people to infiltrate discussion sites and forums to call people like you idiots. Show me the proof they say. Why doesn’t you source come forward? If he knows so much, why not go to Fox or the media? To them, if it’s not broadcast on CNN, it’s not real. Well, they’ve got it backwards. Very little on the news is real. The stock market, the economy, the last presidential polls, very little is real.

But this crew is really internet savvy. They’ve got a lot of people they pay to divert issues on forums, to mock people, to marginalize them. They know what they’re doing. People think they’ll take sites down – hack them. Why do that when they are more effective to infiltrate the discussion? Think about the birth certificate, I mean the eligibility problem of Obama. Perfect example.

DH: How soon do you see things taking place?

RB: They already are in motion. If you’re looking for a date I can’t tell you. Remember, the objectives are the same, but plans, well, they adapt. They exploit. Watch how this fiscal cliff thing plays out. This is the run-up to the next beg economic event.

I can’t give you a date. I can tell you to watch things this spring. Start with the inauguration and go from there. Watch the metals, when they dip. It will be a good indication that things are about to happen. I got that little tidbit from my friend at [REDACTED].

NOTE: At this point, my contact asked me to reserve further disclosures until after the inauguration.

( Between HFTs and derivatives , markets can moved / pushed any way , at any time the PTB desired , to achieve the desired result...... a crash could happen tomorrow if needed.... Here are just a few examples.....)

http://www.zerohedge.com/news/2013-03-12/bitcoin-glitch-sparks-23-flash-crash

Bitcoin 'Glitch' Sparks 23% Flash Crash

Submitted by Tyler Durden on 03/12/2013 21:06 -0400

Equity Markets

HFT

Recoupling

While we are used to seeing insta-crashes in our highly-regulated and trustworthy equity markets, the unregulated digital world of Bitcoins suffered another flash-crash last night. According to Ars Technica, the 23% plungefest in the value of the digital currency (the second in a week) was due not to Waddel & Reed, not HFT algos, but 'forking'Cryptographic algos gone wild agreeing on different (legacy) keys as being correct -akin to finding Tungsten in your Gold bars (and hence the drop in the value). This latest glitch is different from the problem that caused Bitcoin prices to briefly crash to zeroin June of 2011. In that case, the sell-off was caused by the compromise of the exchange itself, whereas this time the glitch occurred in the core Bitcoin software. Obviously, the incident will be another important test of the cryptocurrency's decentralized governance structure - to say nothing of its reputation among the less technically-capable owners and miners (even though BTC rapidly recovered almost all its losses).

Last night's bitcoin software-related crash...

and last week's 'market' based crash

and the life of BTC...

From a high of more than $48 earlier Monday, the value of Bitcoins plummeted to less than $37 around 10 PM Central time on Monday evening, a 23 percent decline. The price has since recovered; one Bitcoin is now worth about $46 - which, one could argue reflects a rapid recoupling with value and confidence (especially given the recent run-up in price) but notably, flash-crashes in equities (as we noted above) never seemed to stop greed-stricken investors piling into them anyway.

Charts: Bitcoincharts.com

(h/t BD)

http://www.zerohedge.com/news/2013-03-12/when-hft-steals-liquidity-exploratory-trading-emini

When HFT Steals Liquidity - Exploratory Trading In The eMini

Submitted by Tyler Durden on 03/12/2013 19:39 -0400

Commodity Futures Trading Commission

Via Nanex,

Exploratory Trading in the eMini

On January 13, 2013, Adam D. Clark-Joseph published Exploratory Trading, which analyzes CFTC audit level trading data in the eMini S&P 500 futures market. This is a special, "regulators-only" data-set that contains all orders and trades, and each order and trade has a trader identifier. What this paper exposes is astounding.

Exploratory trading

Exploratory trading is a form of manipulation designed to test the market's reaction to a trade. Probing for stop orders would be one form of exploratory trading. This paper specifically investigates exploratory trading that attempts to determine whether the bid/ask spread is about to shift up or down a level. The impact on the market would be an increase in intraday volatility. Exploratory trading distorts the market's view of supply and demand and induces trading activity from other participants. Furthermore, as participants learn of the strategy, they will employ counter-measures - which will further muddy an accurate picture of supply and demand for everyone else. This is why regulations ban manipulation.

The Top 8 HFTs Remove Liquidity 59% of the Time

Passive market making involves buying at the bid, and selling at the ask, which earns the market maker the bid/ask spread. Passive market making provides liquidity, narrows spreads, and lowers trading costs. Aggressive trading removes liquidity: buying at the ask (removes sell orders) and selling at the bid (removes buy orders).

Between September 17, 2010 and November 1, 2010 in the eMini futures contract (December 2010 contract, symbol ESZ0):

41,778 accounts traded this contract

30 of these accounts (less than 1/10th of 1%) met criteria to be classified as HFT.

These 30 HFT accounts:

participated in 46.7% of total trading volume.

grossed $1.51 million per trading day.

Of these 30 HFT, the top 8:

were aggressive 59.2% by volume (the other 22 were aggressive 35.9% by volume).

grossed $793,342 per trading day.

Discussion

The top HFTs probe the market by aggressively pinging order books and then analyzing market reaction: a practice thatallows them to get a private glimpse of the "true" supply and demand at the expense of everyone else. Once the market direction is ascertained, these HFT aggressively remove liquidity, causing an immediate market move. Since the eMini is heavily arbitraged by SPY (which in turn is arbitraged by its many components and options), these sudden moves in the eMini will set off waves ofoverwhelming message traffic as traders and algos react and reprice thousands of instruments in milliseconds.

In light of our discovery that Waddell and Reed's trades in the eMini on May 6, 2010 were entirely passive (0% aggressive), we wonder if this probing by HFTs may have set in motion the downward spiral on that day, resulting in the Flash Crash. These HFTs not only manipulated markets on that day in a disastrous way, they drove liquidity providers away from the market.

A lot of media discussion about HFT focuses on 3 benefits: they provide liquidity, narrow spreads and lower trading costs. This Harvard paper exposes some disturbing truths: the top HFT engage in a predatory market manipulation strategy that removes liquidity 59.2% of the time (by volume),causes undue intraday volatility (which amounts to a tax on investors), warps the true picture of supply and demand, and raises trading costs for everyone processing market data.

Perhaps even more disturbing was the Bloomberg article where we first learned of this paper. It appears that rather than investigate HFT manipulating the markets, the regulator is investigating academic access to their audit level data-set.

Next time the media writes about the benefits of HFT - ask them if they've read Adam Clark-Joseph's paper on Exploratory Trading.

and......

http://www.zerohedge.com/news/2013-03-12/did-someone-forget-push-europes-algo-clocks-forward

Did Someone Forget To Push Europe's Algo Clocks Forward?

Submitted by Tyler Durden on 03/12/2013 12:27 -0400

Reality

Still think this market is driven by humans? Behold European stock markets this morning as they collapsed into the pre-Daylight-Savings-Time European close and reversed to the second... and then a few minutes later as reality struck, as Nanex points out, HFTs went wild in FTSE and CAC Futures...

The idiocy of algos...

And Via Nanex -

On March 12, 2013 at 11:49:50, an algo appears to have gone out of control, causing wild oscillations in FTSE and CAC futures.

1. March 2013 FTSE Futures, 1-second interval chart showing trades.

2. March 2013 FTSE Futures - zooming in to about 1/2 minute of data.

3. March 2013 FTSE Futures - zooming in to 5 seconds of time.

4. March 2013 CAC Futures - showing about 1/2 minute of data. Same time period as Chart 2

http://www.zerohedge.com/article/interactive-brokers-peterffy-lashes-out-against-broken-market-nanex-conclusively-proves-hfts

Interactive Brokers' Peterffy Lashes Out Against The Broken Market, As Nanex Conclusively Proves HFT's Were Cause For Flash Crash

Submitted by Tyler Durden on 10/18/2010 14:47 -0400

Ben Bernanke

Capital Markets

Commodity Futures Trading Commission

Securities and Exchange Commission

A recent speech by Interactive Brokers' CEO Thomas Peterffy at the World Federation of Exchanges may just be the watershed insider conversion event that finally opens the eyes of all those who have been living for years with the delusion that modern markets are fair, honest and transparent. As the Interactive Brokers head says: "It is not so much anymore that the public does not trust their brokers. They do not trust the markets, the exchanges, or the regulators either. And why should they, given our showing in the past few years? I must confess to you that I was an ardent proponent of bringing technology to trading and brokerage. Unfortunately, I only saw the good sides. I saw how electronic trading and recordkeeping could be used to force people to be more honest, to make the process more efficient, to lower transaction costs and to bring liquidity to the markets. I did not see the forces of fragmentation and the opportunity for people to use technology to keep to the letter but avoid the spirit of the rules -- creating the current crisis. It is vitally important that we bring an end to this crisis of trust before it spreads any further; that we bring back order, fair dealing and trust in the marketplace." And if there is anything that the 23 sequential outflows from equities demonstrate, it is precisely that the average investor no longer has any trust in either the markets, or its regulator. Furthermore, the latest piece of evidence from Nanex, definitively confirms that not only was the Waddell & Reed's order not the catalyst for the May 6 flash crash, but it was the HFT buyers of this sell order, that "transformed
a passive, low impact event, into a series of large, intense bursts of
market impacting events which overloaded the system. The SEC report uses an
analogy of a game of hot-potato. We think it was more like a game of dodge-ball
among first-graders, with a few eighth-graders mixed in. When the
eighth-graders got the ball, everyone cleared the deck out of panic and
fear." At this point, to the SEC's chagrin, there is nobody left to watch how this particular game of dodgeball, or the latest propaganda scapegoating campaign for that matter, will end.

Before we focus on Nanex's latest report, let's focus on just what it is that catalyzed Peterffy conversion into one of the few who sees the fragmented stock market for the broker-dominated scam it has become: internalization.

The root of the problem, as always, is short-sighted greed on the part of the brokers. Transparent commissions are not enough for them. They want to take more from their customers but without the customers seeing exactly what it is that they are paying. This is done by what is called internalization, which is easiest to illustrate with OTC products. The banks simply take the opposite side of the customers' orders at prices that leave the banks with undisclosed but huge profits.

How do we know that the profits are huge? Just look at the banks’ quarterly financial reports on derivatives dealings. Even the more modest estimates exceed $100 billion per year, worldwide. Customers are on the other side of those trades. Customer losses are on the other side of those bank profits. The amazing thing is that those banks are able to convince their customers that this is good for them and moving these contracts on to the exchanges would harm the customers.

How do they do this? What dark arts do they employ to maintain the status quo? I think their magic consists of such mundane things as million dollar paychecks to the salesmen, golf outings, tickets to games, dinners, Cuban cigars and probably some other blandishments that should not be discussed in polite company.

And of course, the fact that most OTC derivatives "customers" are not playing with their own money. The customers are finance or investment staff that work for large corporations, state or municipal governments, pension funds and insurance companies. These end-user employees get to drink the fine wines, but it is the shareholders or taxpayers that pay for the overpriced derivatives.

This same thing is happening in more subtle ways in exchange listed products. In Europe, investors have a long tradition of investing through their banks. Smaller banks work with larger banks that sit on exchange boards. The boards make rules for the exchanges that allow the trades to take place not at the exchange but somewhere else, merely being reported to the exchange for clearing. As long as the price is anywhere between the lowest bid and the highest offer that was posted on the exchange any time during the day, it is accepted. Some exchanges will accept a trade as long as it is priced anywhere within 10% of the posted bid or offer.

In these scenarios the exchanges’ traditional function -- matching competing bids and offers, resulting in price discovery -- is not used by the brokers, but the brokers are willing to pay the same amount in fees to the exchanges just for the clearing. So the exchanges get the same revenue either way. But I ask you: Is this sustainable? Is there real value added? Is this a healthy, vibrant business model? Or will these exchanges atrophy like unused limbs?

Who cares what will happen in the future? Obviously not the banks, for whom each and every day of continued existence is a taxpayer-funded gift from god, or in this case Bernanke and the administration, which allows them to pay another batch of record bonuses for a catastrophe well done. They know the game is over, and it is now just a matter of when. If they can get paid one or two bonuses in the meantime, so much better.

For those still confused how internalization perverts stock trading, here is a good explanation:

Brokers internalize stock trades and put them up at the clearinghouse. They at least are supposed to provide best execution, but best execution is vaguely defined and poorly enforced. Brokers in the U.S. must post reports showing where they route their customers' orders. But do you suppose that brokers care what's reflected in those reports? They do not.

It should be shocking, but it probably is not, that according to the Rule 606 reports mandated by the U.S. Securities and Exchange Commission, no major online broker, with the sole exception of Interactive Brokers, sent more than 5% of its orders to an organized exchange. More than 95% of their orders go to internalizers!

These brokers ignore the exchanges and sell the orders to internalizers, thereby avoiding exchange fees and getting a nice little payment from the internalizers in return. This payment for order flow adds up to real money after millions of orders are taken into account. The internalizers are supposedly matching the best prices prevailing at the exchanges, so that they can argue that the customers get the best prices.

Luckily, since those using brokers for the most part do so using other people's money, nobody really ends up caring about what the actual execution cost is. Which means billions in revenue for Wall Street firms. It turns out the incremental cost in the US, but especially in Europe, is massive:

If they did, an independent study would not have found that the one broker that actually routes the vast majority of its orders to public exchanges -- and I will not name this broker again -- obtains executions that are on the average 28 cents better per 100 shares in the U.S., and an absolutely stunning 2.84 Euros better per 100 shares in Europe. As much as I love this brokerage firm, it may not be doing anything all that special. It is mostly just quickly routing each order, or parts of an order, to the public exchange with the best posted prices for that order, and quickly rerouting if another exchange becomes more favorable.

So who is left trading on exchanges? Almost nobody... and SkyNet of course.

On exchanges now we have old style market makers stubbornly clinging to the idea that they will be paid for providing liquidity, trading with High Frequency Traders of various kinds--some providing liquidity, some picking off slow quotes, or playing tricks like quote stuffing or manipulative algo trading -- such as suddenly sweeping the market, lifting all offers and as all the machines run for cover, selling it back for a profit.

Where are we heading? These fast money players will eventually burn out. Sooner or later the regular losers will leave and the regular winners will have nobody to trade with except when they make a mistake. The result will be that spreads will widen, which will be welcome news for the internalizers because they will now be able to take the other side of the customer order flow that they buy on a wider market.

As indicated in the recent flash crash report by the U.S. CFTC and SEC, internalizers suck off all the customer orders, but when an imbalance develops they are unable to handle it and they throw the switch to route the orders back to the exchanges, which no longer have the liquidity to deal with it. Since the bulk of the volume is now being traded at prices relative to a displayed market that is no longer driven by real supply and demand, sudden imbalances of buy and sell orders will occur more and more often, giving our industry more and more reputational headaches.

In an environment in which stock trading has become a side effect of what is essentially a tolling operation, in which exchanges keep up appearances that there is liquidity, when there is merely volume churn, and brokers syphon off tens of billions of investment capital with the complicity of the buyside asset managers, in exchange for a lap dance and $500 bottle of wine, is there even a need for market makers?

Are market makers necessary in mature markets? I am not sure. Many futures exchanges have functioned well for decades without designated market makers. On the other hand, if an exchange would like to be assured of the continuous availability of buyers and sellers, it should have registered market makers with serious affirmative obligations. But if you want them to assume those obligations you must give them something in return, preferably something that will not cost you any money, such as modest preferential access.

Market makers, not so much in stocks as in options, must maintain tens of thousands or hundreds of thousands of quotes at the exchanges, and when some input makes them move those quotes they must move them in a matter of milliseconds. On the opposite side, we have High Frequency Traders who are waiting for just such an input signal to quickly grab those quotes that have not yet been moved. This is not an even playing field. It obviously takes much longer for the market maker to move thousands of quotes than for the HFT to hit a handful.

If you want to have market makers you should give them some modest preferential access. Hold every order for a tenth of a second with the exception of market maker quote updates for products in which the market maker is registered and has affirmative obligations. There is simply no other measure that can protect market makers against being picked off. If you do not do this, market makers will either make wide markets or just cease to be registered as market makers.

In return you should require market makers to provide liquidity and not take liquidity in some very high percentage of their trades and give the market makers strict quoting requirements.

Peterffy's conclusion is in some ways sad, as it confirms everything we have been warning about for almost two years now:

The financial markets of at least the world's developed countries are at a turning point. Technology, market structure and new products have evolved more quickly than our capacity to understand or control them. The result has been a series of crises over the past few years that have caused many investors to lose confidence or to think that the whole system is a rigged game.

This is a very dangerous development because the purpose of our financial markets is to guide the evolution of our economies by allocating capital to industries and companies that we want to grow, and to allow businesses and investors to efficiently manage risk. If the public comes to perceive that the financial markets are a con game and that they are the marks, then companies and entrepreneurs will not get the funds they need to grow our economies, provide jobs and raise living standards.

Alas, the public already perceives the con game nature of markets, and refuse to be the marks any longer. And nobody in charge cares. At this point capital markets are no longer the fuel for entrepreneurial innovation and economic growth. They are a parasite whose only purpose is to make the bankers even richer before the next, terminal flash crash. And those who would accuse Peterfy of merely being a hypocrite pushing his own agenda, we read in Barron's that he "said in an e-mail that Timber Hill's next step, should market conditions merit, will be to gradually widen quoted prices, and cut the size of trading commitments. Many market makers use Timber Hill's prices and liquidity—the number of stocks or options market makers are willing to buy or sell—to refine prices. If Timber Hill steps away, others are likely to follow, and investors will find many options prices worse than market conditions may merit." Of course, this would also be the beginning of the end for those most hated of all market parasites, the High Frequency Traders.

Which brings us to the second topic: Nanex' final resolution on who it was the caused the Flash Crash. Spoiler alert: it was not Waddell & Reed. It was High Frequency Traders, it was the HFT buy response to a sell roder, and by implication, it was the SEC's criminal negligence in allowing this market aberration to persist as long as it has.

From Nanex:

Our analysis of the Waddell & Reed e-Mini trades led us to an unexpected break-through. By process of elimination, and with the SEC report for context, we finally have a crystal clear understanding what caused the May 6, 2010 flash crash.

First of all, the Waddell & Reed trades were not the cause, nor the trigger. The algorithm was very well behaved; it was careful not to impact the market by selling at the bid, for example. And when prices moved down sharply, it would stop completely.

The buyer of those contracts, however, was not so careful when it came to selling what they had accumulated. Rather than making sure the sale would not impact the market, they did quite the opposite: they slammed the market with 2,000 or more contracts as fast as they could. The sale was so furious, it would often clear out the entire 10 levels of depth before the offer price could adjust downward. As time passed, the aggressiveness only increased, with these violent selling events occurring more often, until finally the e-Mini circuit breaker kicked in and paused trading for 5 seconds, ending the market slide.

Because of arbitration, when the e-Mini changes price with high volume, many ETFs are repriced (quotes updated, trades executed). The component stocks of ETFs are also repriced, along with many indexes. And finally, all the option chains for the ETFs, their components and indexes are also repriced. The entire system simply cannot absorb the impact of a sudden move in the e-Mini on high volume. A sale (or purchase) of 2,000+ contracts which rips through one-side of the depth of book in 50-100 milliseconds, will immediately overload many systems. The impact reverberates for a much longer period of time than the sell (or buy) event itself.

The first large e-Mini sale slammed the market at approximately 14:42:44.075, which caused an explosion of quotes and trades in ETFs, equities, indexes and options -- all occurring about 20 milliseconds later (about the time it takes information to travel from Chicago to New York). This surge in activity almost immediately saturated or slowed down every system that processes this information; some more than others. The next sell event came just 4 seconds later at 14:42:48, which was not enough time for many systems to recover from the shock of the first event. This was the beginning of the freak sell-off which became known as the flash crash.

In summary, the buyers of the Waddell & Reed e-Mini contracts, transformed a passive, low impact event, into a series of large, intense bursts of market impacting events which overloaded the system. The SEC report uses an analogy of a game of hot-potato. We think it was more like a game of dodge-ball among first-graders, with a few eighth-graders mixed in. When the eighth-graders got the ball, everyone cleared the deck out of panic and fear.

The chart above shows the high and low prices of the eMini for each 100ms interval (light blue). The green line with green dots and numbers shows the total number of Waddell & Reed contracts sold up to that point. Red price bars indicate the range of prices of W&R trade executions during that period. The light blue bars in the bottom section indicate the volume of eMini contracts traded in that interval. The scale for the volume is below the scale of the prices. Finally, the light green line in the chart above, shows the total number of equity trades in all equities during that 100ms interval -- there is no scale for this line -- it is shown to illustrate the correlation with the eMini contract volume traded during the same interval.

The chart below is the same as the chart above, except in place of the trade counts (light green above), it shows the quote counts for all equities during each interval (light gray).

We have been calling for everyone to pull their money out of this broken market. Now, finally, industry insiders are joining our call. How much longer before everyone realizes the truth and says never again to a casino so broken it will have no choice but to cannibalize itself very, very soon?

h/t Prophet

Catharsis Ours

Tuesday, March 12, 2013

Reuters' Matthew Keys indicted for conspiring with hacker group 'Anonymous'

Secret Service and FBI investigating leaked Obama financial records

More Prominent Credit Reports Leaked As Agencies Explain How Hackers Did It

Monday, March 11, 2013

Pentagon creating teams to launch cyberattacks as threat grows

By Ellen Nakashima, Updated: Tuesday, March 12, 4:44 PM

DoD Plans to Use Preemptive Deadly Force on Hackers, Cyber Threats

Chase.com Hacked?

Casey Research: An update on the coming “bond market crash”

Peter Schiff- Ben Bernanke’s Stimulus Induced Temporary High- World’s Biggest Ponzi Scheme

* * *

DHS Insider Report: Coming This Spring: “Life for the Average American is Going to Change Significantly”

Bitcoin 'Glitch' Sparks 23% Flash Crash

When HFT Steals Liquidity - Exploratory Trading In The eMini

Exploratory Trading in the eMini

Exploratory trading

The Top 8 HFTs Remove Liquidity 59% of the Time

Discussion

Did Someone Forget To Push Europe's Algo Clocks Forward?

Interactive Brokers' Peterffy Lashes Out Against The Broken Market, As Nanex Conclusively Proves HFT's Were Cause For Flash Crash

No comments:

Post a Comment

Tuesday, March 12, 2013

Reuters' Matthew Keys indicted for conspiring with hacker group 'Anonymous'

Secret Service and FBI investigating leaked Obama financial records

More Prominent Credit Reports Leaked As Agencies Explain How Hackers Did It

See Also

Monday, March 11, 2013

Pentagon creating teams to launch cyberattacks as threat grows

By Ellen Nakashima, Updated: Tuesday, March 12, 4:44 PM

DoD Plans to Use Preemptive Deadly Force on Hackers, Cyber Threats

Chase.com Hacked?

Casey Research: An update on the coming “bond market crash”

Peter Schiff- Ben Bernanke’s Stimulus Induced Temporary High- World’s Biggest Ponzi Scheme

* * *

DHS Insider Report: Coming This Spring: “Life for the Average American is Going to Change Significantly”

Bitcoin 'Glitch' Sparks 23% Flash Crash

When HFT Steals Liquidity - Exploratory Trading In The eMini

Exploratory Trading in the eMini

Exploratory trading

The Top 8 HFTs Remove Liquidity 59% of the Time

Discussion

Did Someone Forget To Push Europe's Algo Clocks Forward?

Interactive Brokers' Peterffy Lashes Out Against The Broken Market, As Nanex Conclusively Proves HFT's Were Cause For Flash Crash

No comments:

Post a Comment