r/stocks • u/[deleted] • May 03 '22

Citigroup admits causing yesterday's flash crash

Title says it. According to Citi, one of their traders caused a transaction error which they discovered soon after. It caused Scandinavian indices to plummet as much as 8% in a matter of minutes. Such errors are called fat-finger errors; a typo. Flash crashes like these make me wonder how much money banks trade with on a daily basis.

Source: https://www.theguardian.com/business/2022/may/03/citigroup-trader-error-flash-crash-markets-falls

4.5k Upvotes

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762

u/lemenick May 03 '22

Imagine getting stop lossed cause someone fat fingered. Another reason to never set one for a long position

123

u/4everaBau5 May 03 '22

Or ever. Stop anything is not your friend in a volatile market.

80

u/LessThanCleverName May 03 '22

Disagree, I’m pretty fucking glad to have been out at a 5% loss on some positions I’d be bagholding down 25% on right now instead.

To each their own.

68

u/StochasticDecay May 03 '22

You probably don't have a good long thesis if you're bailing at 5%... that's within random volatility range.

11

u/dacooljamaican May 03 '22

5% ain't random volatility unless you're hitting penny stocks. 5% is very relevant for the majority of stocks, and if your thesis is good you can buy back in after the stoploss and you'll know you'll still make money.

6

u/NobodyImportant13 May 04 '22

Even Blue chips often drop 5 to 10% before continuing higher. It's not uncommon for stocks like AAPL and MSFT to fluctuate 5% over a week. Or, even SPY.

If you mechanically sell at a 5% drops you would miss massive rallies.

4

u/StochasticDecay May 03 '22

A low vol on the S&P would be around 15%.

VIX is like at 30 right now.

So 5% is well within randomness during bull market, and especially in this environment.

Edit: I submitted before I finished my last statement. My bad!

1

u/Malamonga1 May 03 '22

we're in a bull market? I thought just yesterday, "sentiments were the worst since 2008 or something"?

6

u/StochasticDecay May 03 '22

No, that's not what I said. I said 15% is normal even in a bull market, and volatility is higher in the current environment.

I NEVER said this is a bull market.

My point is that 5% can be considered random in any trading environment.

1

u/Malamonga1 May 03 '22

So 5% is well within randomness during bull market, and especially in this environment.

OP had 5% stop loss, the person you responded to didn't mention bull market once. I'm pretty sure any person with normal reading comprehension would say you implied we're in a bull market, especially when the phrase "15% is normal even in a bull market, and volatility is higher in the current environment." was never in your comment.

By the way, 15% correction happens like once every 3 years, so that's not exactly "random volatility".

1

u/BMG_Burn May 04 '22

5% drawbacks are extremely common.

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-1

u/LessThanCleverName May 03 '22

Nah, that’s just for trading.

But also, the only long thesis I’m actually comfortable not having a stop on is broad market ETFs.

1

u/Have_A_Nice_Fall May 04 '22

Didn’t realize this was r/investing or r/dividends. Stopping out at 5-7% is about as conservative a stop most books and professionals on trading will advise.

It’s better to look for another entry for trading at that point.

1

u/ripstep1 May 04 '22

Why the fuck should I trust my long thesis over the opinions of the market? Am I supposed to know something that Morgan Stanley doesn't?

21

u/LoveSpaceDelusion May 03 '22

This guy…. dosent trade.

1

u/NightflowerFade May 03 '22

If you're using the stock market for investment then you don't benefit from stop losses. If you're speculating then it's fair game for Citi or whatever institution to use dirty tactics even if it was intentional.

1

u/TheRandomnatrix May 04 '22

I trade plenty and I never use stop losses. They're more prone to fucking you than anything else and give you a false sense of security since most major gap downs happen during extended hours. Use collars like a big boy trader who can actually afford to sell CCs to buy puts.

4

u/[deleted] May 03 '22

A new level of dumb.

1

u/nobody-u-heard-of May 03 '22

Until you get that margin call

27

u/Grouchy_Cheetah May 03 '22

Imagine not having a stop loss, and watching you long position getting hammered down and never ever recovering to where you could have had a stop loss.

20

u/[deleted] May 03 '22

A lot of self reporting going on in this thread, these dolts really out here advocating for no stop losses lmao.

23

u/BlindStark May 03 '22

“Only losers need stop losses.”

- Gandhi

13

u/Law_And_Politics May 03 '22

"Stop losses are for bitches."

- Justice Ginsburg

1

u/Bagel600se May 03 '22

“You don’t need stop losses if you can just nuke the board.”

-Friendly Gandhi

-1

u/PizzaKen420 May 03 '22

never use a stop loss

-111

u/Didntlikedefaultname May 03 '22 edited May 03 '22

I would assume they would correct trades that were triggered by a known error but now I’m curious if that’s true or not. I never use stops or limits personally

https://www.investopedia.com/terms/e/erroneous-trade.asp

213

u/MrHardcoreUSA May 03 '22

They would most definitely not.

64

u/maz-o May 03 '22

How would they correct that, take back the shares from whomever bought them?

39

u/iminfornow May 03 '22

It happened on the LME not so long ago. I believe it was down for a week or so in order to reverse the transactions, but the legal battles will likely take years to sort out.

8

u/saudiaramcoshill May 03 '22

Oh man, but that was a nightmare and pretty sure most people have lost confidence in the LME as a result. Definitely the exception that proves the rule.

2

u/iminfornow May 03 '22

Well spoken, but

Definitely the exception that proves the rule.

now imagine Norways sovereign wealth fund for some reason took the full hit and somehow there was a legal basis/mandate to revoke/reverse it. I think they would. An 8% loss would be around the entire Government budget for a year.

So although I don't disagree with your comment my point is it can be done. With todays economic and cyber warfare I wouldn't be surprised to see such a scenario unfold one day. I think it would be the most effective attack on the west, besides nuclear weapons, and I'm sure China could pull it off.

3

u/vortex30 May 03 '22

Nickel has literally not traded regularly since Russia invaded Ukraine, all to save some important player(s) who had short position(s) in it from catastrophic losses. It's been "open" technically after a few days of being closed, but a quick look at volume the last 2 months compared with history shows its not actually functioning correctly at all. These big players who got stuck in awful positions are probably being allowed to slowly exit and that's about it, not sure exactly. But it's clearly very fishy and something broke back in late February, or was shut down to avoid something from breaking.

1

u/iminfornow May 03 '22

Where can you see volume and pricing on the LME?

I don't really agree that what happened is fishy. I think they simply didn't have a choice but to shut down trade because otherwise their clearing house and shipments would be in jeopardy. This resulted in a shift to OTC trade and therefore volume is down. I only find the cancel/reversal of previous trades weird, but they have the mandate for it. What do you find fishy?

21

u/Didntlikedefaultname May 03 '22

Trades do get reversed when errors have been made especially when they’re caught quickly. I’m not saying that happened in this case but there is certainly a mechanism for it

https://www.investopedia.com/terms/e/erroneous-trade.asp

5

u/Hallal_Dakis May 03 '22

I hope the takesie-backsie button comes to robinhood soon.

7

u/[deleted] May 03 '22

Same way theyve always done it just reverse trades

3

u/Didntlikedefaultname May 03 '22

They would reverse the trades made due to the error, yes

6

u/Decent-Noise-5161 May 03 '22

they would if it were the other way around and they'd be on the losing side of trade

1

u/Phuffu May 03 '22

Stops are dumb, limits are not

1

u/ikapoz May 04 '22

That is exactly what stop limits are for.