[Infowarrior] - Nanex ~ The SEC Redefines Liquidity (when it's convenient)

[Richard Forno]

Nanex ~ The SEC Redefines Liquidity (when it's convenient)

April 12, 2012

While rereading the SEC's flash crash report,  Findings Regarding the Market Events of May 6, 2010, and a very similar report written at the same time by some of the same authors, we came across statements that are clearly false, and grossly mischaracterize the algorithm that executed the 75,000 S&P futures contracts and blamed for causing the flash crash. Be sure to see our recently updated detailed analysis and charts of the contracts sold by the algo.

We contacted one of the co-authors and things grew murkier. The email exchange was very disturbing because the explanation was basically a new and bizarre definition of liquidity in an attempt to try and make the paper's text agree with the facts. That, or the authors have based the foundation of the entire paper on a very unusual interpretation of liquidity: something that would completely nullify any conclusion. The SEC report for example, uses the word "liquidity" 249 times in 89 pages: a word that may now have a completely different meaning from anyone's current understanding of that term.

< -- >

http://www.nanex.net/aqck/2977.html

---
Just because i'm near the punchbowl doesn't mean I'm also drinking from it.