Is Nasdaq Lying About What It Knew On FaceBook IPO Day?

Minutes ago we reported that as the WSJ broke an hour ago, the Nasdaq has pronounced a retroactive mea culpa, claiming that had it acknowledged back then what it understands now, namely the plethora of technical glitches plaguing its systems, that it would have merely called the whose FaceBook IPO off. Yet we wonder: is the NASDAQ lying? The explanation why we are suspicious that the exchange knew all as well well just how badly it was overloaded, is the following stunning report from, who else, Nanex, which displays that for a period of 17 seconds, just close to the time the FaceBook IPO launched for trade, all “rates and trades from reporting exchange NASDAQ for all NYSE, AMEX, ARCA and Nasdaq listed stocks entirely stopped.” In other words: complete radio silence. Or, as Nanex wonders, did “Nasdaq panic and reboot key systems to acquire control over Substantial Frequency Trading, just just before the FB open of trading?” If so, not only was Nasdaq fully aware of the completely technical glitchiness of its systems, but it might well have precipitated even more confusion and more trading errors, resulting in the two hour trade verify delays first reported on Zero Hedge, all in a mad dash and epic scramble to stay away from reputational and monetary damage at the expense of traders.

On Might 18, 2012 beginning at 11:29:52 and continuing for almost 17 seconds until finally 11:30:09, quotes and trades from reporting exchange Nasdaq for all NYSE, AMEX, ARCA, and Nasdaq listed stocks fully stopped. In exchange-converse, 17 seconds is 17,000,000 microseconds – an eternity by HFT standards. It’s wonderful no one seen.

This was quickly just before Facebook began trading.

The charts beneath show targeted traffic rates for rates and trades by reporting exchange for all listed stocks in the U.S. carried on the CQS, CTA, UQDF and  UTDF. CQS carries quote visitors and CTA carries trade reports for NYSE, AMEX, and ARCA listed stocks. UQDF carries quote site visitors and UTDF carries trade reports for all Nasdaq listed stocks. Facebook (and Apple) rates would have been carried on UQDF, and trades on UTDF.

Chart 1. CQS (100 ms) exhibiting quote price from reporting exchange Nasdaq only.

Note how usually Nasdaq sends 100,000 quotes per second. Going to zero for even 1 second throughout trading hours would indicate a issue.

Chart 3. CQS (100 ms) showing quote price from all reporting exchanges.

Chart 4. UQDF (100 ms) displaying quote rate from all reporting exchanges.

Chart 5. CQS (25 ms) displaying quote price from reporting exchange Nasdaq only. (Zoom of Chart 1)

Chart 6. UQDF (25 ms) exhibiting quote rate from reporting exchange Nasdaq only. (Zoom of Chart 2)

Chart 7. CTA (100 ms) displaying trade price from reporting exchange Nasdaq only.

Chart 8. UTDF (100 ms) showing trade price from reporting exchange Nasdaq only.

The question: did Nasdaq, in its scramble for bragging rights, and of course, exchange charges, rush out and stumble in order to get Facebook out of the gate as soon as attainable, without having regard for a effectively functioning publish-IPO industry, just to steer clear of the reptuational (and monetary) damage associated with pulling a “industry conditions?”

We do not know – but we are 100% specific that numerous attorneys will be asking just that query in the days and weeks to come.

Read More Here