Volume-based stock chart of the day, flash crash edition

By Felix Salmon
September 24, 2010
Here's the volume-based stock chart you've all been waiting for: the one for May 6, the day of the flash crash.

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Here’s the volume-based stock chart you’ve all been waiting for: the one for May 6, the day of the flash crash. Since the big spike in volume was concentrated at the end of the day, in the final hour of trading, the time-based chart squeezes a huge amount of activity into a relatively small horizontal space. The volume-based chart gives the crash a bit more space.

Volume vs Time - SPY - 20100506.jpg

On the other hand, it’s worth nothing that most of the day’s trading still took place before the crash happened.

On thing that strikes me about this chart is not the crash itself but rather the run-up to it: the initial drop from about 1,160 on the S&P down to about 1,120. On the time-based chart, the decline starts slowly and then rapidly speeds up; on the volume-based chart, however, it’s much steadier. And in fact we saw roughly as much volume in the normally-quiet hours between about noon and 2:40 as we did during the craziness of the crash itself and its aftermath. I’m not going to hazard a guess as to what this means, but I do think it shows that May 6 was a pretty unusual day in the markets even before the flash crash happened.

Many thanks to Omer Uzun at Proteus Financial for putting this together: it’s only one tiny piece in the puzzle, but surely every little bit helps.

3 comments

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thanks for sharing this analysis. what’s the main reason of this crash?

Posted by webhosting101 | Report as abusive

Why does the bottom axis have times on it? Shouldn’t it be %s?

Posted by mjturner | Report as abusive

The top axis and bottom axis use different timescales, if you look closely.
The top axis divides the day into ~ 40 min increments, and shows the amount of trading done there.
The bottom axis divides the day into 10% of TRADE VOLUME…so the time areas are variable. The % adds up naturally, but what it really shows is what % of trades are getting done in what time periods, very precisely. The top bar doesn’t convey volume, just activity.

As for reason…the only thing people can point at now is a sell off on options relating to the S&P 500, I believe. The order was so massive it borked the chain, and the HFT’s who comprise 70% of trading volume exited the market, crashing liquidity and driving prices down to unreal levels as counterparty demands evaporated.

There’s probably more to it, but we’ll see.

==RED

Posted by REDruin | Report as abusive