Nanex ~ 16-May-2013 ~ Merck Liquidity Exposes System
Bottlenecks
On May 16, 2013 at 11:17:10, the price of Merck (Symbol MRK, market cap $140 billion)
dropped 3% in about 25 milliseconds on 300,000 shares (1,000 trades). This event uncovered bottlenecks in the networks
that processes and transmit stock market information. Bottlenecks are what caused the
flash crashes of May 6, 2010 and September 29, 2008.
Update: The next day, Merck traded back down to $45 - but it took nearly
two hours, 9 million shares and 34,000 trades (versus 25 milliseconds, 300,000 shares
and 1,000 trades).
We created a video showing 10 milliseconds of this event (11:17:09:960 to 11:17:09.969) slowed down 40,000
times: 1. MRK - showing trades color coded by exchange and NBBO (gray shade) over 1/2 second of time.
Note how trade reports from EDGX (blue diamonds) start getting behind. Also, the flat tops in the
3rd panel (tick volume per millisecond) are an indication of a bottleneck. 2. MRK - showing bids and asks color coded by exchange and NBBO (gray shade) over 1/2 second of time.
Note the peak quotes/second rate of 100,000 on a 1 millisecond basis. That is the highest
we've seen (though we haven't searched for this metric specifically). Nanex Research
