03/28/2012 archive

The Bats Affair: When Machines Humiliate Their Masters

By Brian Bremner, Business Week

March 23, 2012

In the annals of business screw-ups, Bats has certainly made its mark. Bats stands for Better Alternative Trading System and the company runs two exchanges that collectively rank third in terms of U.S. share trading, behind New York Stock Exchange and Nasdaq. The Bats exchanges account for 11 percent to 12 percent of daily U.S. equity trading, according to its website. The company came of age with the expansion of high-frequency trading over the last decade and the proliferation of quant-jock-driven electronic firms that dominate the buying and selling of U.S. equities. Bats founder Dave Cummings is chairman and owner of high-frequency trading firm Tradebot Systems.

Today was supposed to be the Lenexa (Kan.)-based company’s moment in the limelight as it tried to sell about 6.3 million shares in the $16 to $18 dollar per share range. Instead, something went terribly wrong. The company’s shares somehow ended up trading for pennies per share early in the trading day on both the Bats bourse and Nasdaq, according to data reviewed in this Bloomberg story. Then tech investors and Apple (AAPL) fanboys the world over were dismayed when a single trade for 100 shares executed on the Bats market sent Apple’s shares to $542 per share, down sharply from recent levels. (The company set a new 52-week high of $609 per share on March 21.) The stock temporarily halted trading and recovered.

And, as a matter of fact, we do know what went wrong.

Bats: The Epic Fail of the Worst IPO Ever

By Dan Beucke, Business Week

March 23, 2012

Bats priced 6.3 million shares through underwriters yesterday and appeared set to begin trading about 90 minutes into the day when chaos erupted. While the company quoted its shares at $15.25 at 10:45 a.m. on its website, feeds including those sent to Bloomberg LP displayed different prices. At 11:14 a.m., Bloomberg received data showing 1.26 million shares had traded, with the most recent execution at 3.84 cents and the lowest transaction at 0.02 cent.

Compounding the confusion, a single trade for 100 shares executed on a Bats venue at 10:57 a.m. briefly sent Apple down more than 9 percent to $542.80, data compiled by Bloomberg show. Two more transactions, which sent the stock back above $598, were made before the halt. The stock stayed around that level once trading resumed five minutes later and the errant trade, along with the Bats transactions, were later canceled. Bats sent a notice about 10 minutes before the Apple trade saying it was investigating “system issues” affecting companies with ticker symbols ranging between A and BF. Apple’s is AAPL. Bats’s ticker was BATS. At 11:07 a.m., Bats’s BYX Exchange took a procedural step known as “declaring self help” against its BZX exchange, indicating that it had stopped routing orders to the market because BZX wasn’t responding to messages quickly enough.

BATS exchange withdraws IPO after stumbles

By Olivia Oran, Jonathan Spicer, Chuck Mikolajczak and Carrick Mollenkamp, Reuters

Sat Mar 24, 2012 1:37pm EDT

The debacle raised questions for regulators, investors and the underwriters, including Citigroup Inc, Morgan Stanley and Credit Suisse Group, which were listed before the IPO as major shareholders.

…

Since the May 2010 “flash crash” in which nearly $1 trillion in market value disappeared in minutes, the Securities and Exchange Commission under Chairman Mary Schapiro has pledged to crack down on problems in the high-speed electronic marketplace, which regulators worry has grown unstable and perhaps unfair as high-frequency trading has grown in prominence.

…

It is expected to draw even more scrutiny from regulators looking into the soundness of the exchange’s servers, trade-matching engines and computer codes, and it could land BATS in legal trouble for withdrawing its IPO after trades were executed in the public marketplace, according to experts.

…

“It’s just another black eye for the fragmented equity structure,” said Joe Saluzzi, co-head of equity trading at Themis Trading in Chatham, New Jersey, and a frequent critic of U.S. equities market structure. “Every day we see things like flash crashes and now IPOs that can’t get off the ground.”

But don’t worry, our captive fearless SEC facilitators regulators are on the case and the Obama/Holder Justice Department will make sure that everyone skates any irregularities are appropriately corrected.

Or not.

You see, the thing is that the US contribution is already so insignificant that it’s chump change even for Gabon.

Part 1

Part 2

Yup.  We are exceptional.

“Punting the Pundits” is an Open Thread. It is a selection of editorials and opinions from around the news medium and the internet blogs. The intent is to provide a forum for your reactions and opinions, not just to the opinions presented, but to what ever you find important.

Thanks to ek hornbeck, click on the link and you can access all the past “Punting the Pundits”.

Wednesday is Ladies Day

Katrina vanden Heuvel: The Morally Corrupt GOP

Republicans Are Causing a Moral Crisis in America

There is moral crisis afoot! So say the Republican candidates for president, their pals in Congress and in state houses. Abortion, gay marriage, contraception – contraception, for Pete’s sake – things that so shock the conscience that it’s a wonder The Washington Post can even print the words!

Here’s something I bet you wouldn’t think I’d say: They’re right. There is a moral crisis in the United States. The only thing is – they’re wrong about what it is and who is causing it.

The real crisis of public morality in the United Statesdoesn’t lie in the private decisions Americans make in their lives or their bedrooms; it lies at the heart of an ideology – and a set of policies – that the right-wing has used to batter and browbeat their fellow Americans.

Michele Chen: Isolated Incidents: A Hijab, a Hoodie, and an Iraqi American’s Death

As reporters clamored for breaking news about the vicious attack on Shaima Alawadi, an Iraqi American mother of five in El Cajon, California, her teenage daughter Fatima turned to the interviewer with a question of her own

   “‘Why did you take my mother away from me? You took my best friend away from me,’ she said, choking with tears, in an interview with CNN affiliate KUSI. ‘Why? Why did you do it? I want to know. Answer me that.‘”

So far, neither the grieving family’s pleas, nor CNN, nor the police have been able to provide any answers. Issuing the standard platitude about the ongoing investigation, the authorities described it as evidently “an isolated incident.” The grim circumstances of Alwadi’s death, however, point to a pattern of hate crime that’s devastatingly familiar to many Muslim and Arab communities.

Can the government force you to eat broccoli or buy a cell phone? Those were some of  the questions asked during the first two of three days of hearings before the US Supreme Court over whether it is constitutional for the government to mandate an individual to buy health care insurance from a private company or face a “penalty” to be collected by the Internal Revenue Serve. Candidate Barack Obama opposed a mandate but changed his mind, including it his “signature” [Affordable Care Act , taking single payer and then the option for a public sponsored insurance off the table. At this point, the majority of the public is opposed to the mandate and about a third want the entire bill scrapped, even though it has a few good provisions such removing pre-existing conditions as a reason to deny coverage and the implementation of lifetime caps on what the insurance company will pay.

Dahlia Lithwick, a senior editor and legal correspondent for Slate, gives her analysis of the first two days:

One thing was clear after the two hour session (pdf) at the Supreme Court on the constitutionality of the Affordable Care Act: The outcome of President Obama’s signature legislative achievement probably rests on the shoulders of two men-Chief Justice John Roberts and Justice Anthony Kennedy. Or, to put it differently, everyone else seems to have staked a clear position. [..]

In the beginning, all eyes were on Kennedy who opened his questioning by asking Solicitor General Donald Verrilli to “assume this law is unprecedented.” (Gulp. That isn’t the way Verrilli wanted this to begin.) Both Kennedy and Roberts pressed Verrilli to enunciate a limiting principle on the congressional power asserted here. Or as Kennedy put it, early in the argument: “Can you identify any limits on the commerce clause?” [..]

Kennedy had serious doubts and Verrilli appeared unable to allay them. The odds on a 5-4 vote to strike down the law looked good. Kennedy asked far fewer questions of the challengers, although near the end of the morning he said, in his inimitably oblique style that young people are “uniquely, proximately very close to affecting the rates of insurance and the cost of providing medical care in a way that is not true in other industries.” That may suggest he believes that the health insurance market really is unique in some ways. [..]

My sense is that we saw only a part of what the justices were really thinking today. We heard Roberts and Kennedy expressing doubts about each side of the argument. But we didn’t get to hear them think aloud about what it actually means to strike down a monumental act of congress. We can assume that is weighing on some of the justices, nonetheless. The other thing we didn’t hear much about today was case law. Justice Stephen Breyer pointed out more than once that the justices weren’t there to debate whether or not they liked the bill. But it may be worth counting up the references to forced gym memberships, cellphone purchases, and broccoli mandates, and tallying them up against references to actual court cases. That’s either because the mandate is so unprecedented that precedent doesn’t matter. Or, because precedent just doesn’t matter.

What we do know is that an individual can survive very well without broccoli or a cell phone but at some point that individual will need health care. In another article by Ms. Lithwick she points out that the conservative argument that this is about freedom has a very dark side:

It’s always a bit strange to hear people with government-funded single-payer health plans describe the need for other Americans to be free from health insurance. But after the aggressive battery of questions from the court’s conservatives this morning, it’s clear that we can only be truly free when the young are released from the obligation to subsidize the old and the ailing. [..]

Freedom also seems to mean freedom from the obligation to treat those who show up at hospitals without health insurance, even if it means letting them bleed out on the curb. When Solicitor General Donald Verrilli tries to explain to Justice Scalia that the health care market is unique because “getting health care service … [is] a result of the social norms to which we’ve obligated ourselves so that people get health care.” Scalia’s response is a curt: “Well, don’t obligate yourself to that.” [..]

Freedom is the freedom not to rescue. Justice Kennedy explains “the reason [the individual mandate] is concerning is because it requires the individual to do an affirmative act. In the law of torts, our tradition, our law has been that you don’t have the duty to rescue someone if that person is in danger. [..]

Freedom is to be free from the telephone. [..]

Freedom is the freedom not to join a gym, not to be forced to eat broccoli. It’s the freedom not to be compelled to buy wheat or milk. And it’s the freedom to purchase your health insurance only at the “point of consumption”-i.e., when you’re being medivaced to the ICU (assuming you have the cash). [..]

Some of the members of the court find this notion of freedom troubling. Justice Ruth Bader Ginsburg notes that: “Congress, in the ’30s, saw a real problem of people needing to have old age and survivor’s insurance. And, yes, they did it through a tax, but they said everybody has got to be in it because if we don’t have the healthy in it, there’s not going to be the money to pay for the ones who become old or disabled or widowed. [..]

Sotomayor, again pondering whether hospitals could simply turn away the uninsured, finally asks: “What percentage of the American people who took their son or daughter to an emergency room and that child was turned away because the parent didn’t have insurance-do you think there’s a large percentage of the American population who would stand for the death of that child if they had an allergic reaction and a simple shot would have saved the child?” {..]

This case isn’t so much about freedom from government-mandated broccoli or gyms. It’s about freedom from our obligations to one another, freedom from the modern world in which we live. It’s about the freedom to ignore the injured, walk away from those in peril, to never pick up the phone or eat food that’s been inspected. It’s about the freedom to be left alone. And now we know the court is worried about freedom: the freedom to live like it’s 1804.

My biggest problem is that forcing people to buy insurance from a private company that does not insure access to care and cost controls or without an inexpensive public option, like buying into Medicare, is just a financial gift to the insurance companies. Without a public option, this bill is a major failure and unlikely to be fixed in the future, as so many Obama supporters claimed, or be replaced if SCOTUS declares the bill unconstitutional.

This is your morning Open Thread. Pour your favorite beverage and review the past and comment on the future.

Find the past “On This Day in History” here.

March 28 is the 87th day of the year (88th in leap years) in the Gregorian calendar. There are 278 days remaining until the end of the year.

On this day in 1979, the nuclear reactor at Three Mile Island overheats causing a partial meltdown. At 4 a.m. on March 28, 1979, the worst accident in the history of the U.S. nuclear power industry begins when a pressure valve in the Unit-2 reactor at Three Mile Island fails to close. Cooling water, contaminated with radiation, drained from the open valve into adjoining buildings, and the core began to dangerously overheat.

The Three Mile Island nuclear power plant was built in 1974 on a sandbar on Pennsylvania’s Susquehanna River, just 10 miles downstream from the state capitol in Harrisburg. In 1978, a second state-of-the-art reactor began operating on Three Mile Island, which was lauded for generating affordable and reliable energy in a time of energy crises.

Three Mile Island Nuclear Generating Station

The power plant was owned and operated by General Public Utilities and Metropolitan Edison (Met Ed). It was the most significant accident in the history of the USA commercial nuclear power generating industry, resulting in the release of up to 481 PBq (13 million curies) of radioactive gases, and less than 740 GBq (20 curies) of the particularly dangerous iodine-131.

The accident began at 4 a.m. on Wednesday, March 28, 1979, with failures in the non-nuclear secondary system, followed by a stuck-open pilot-operated relief valve (PORV) in the primary system, which allowed large amounts of nuclear reactor coolant to escape. The mechanical failures were compounded by the initial failure of plant operators to recognize the situation as a loss-of-coolant accident due to inadequate training and human factors, such as human-computer interaction design oversights relating to ambiguous control room indicators in the power plant’s user interface. In particular, a hidden indicator light led to an operator manually overriding the automatic emergency cooling system of the reactor because the operator mistakenly believed that there was too much coolant water present in the reactor and causing the steam pressure release. The scope and complexity of the accident became clear over the course of five days, as employees of Met Ed, Pennsylvania state officials, and members of the U.S. Nuclear Regulatory Commission (NRC) tried to understand the problem, communicate the situation to the press and local community, decide whether the accident required an emergency evacuation, and ultimately end the crisis. The NRC’s authorization of the release of 40,000 gallons of radioactive waste water directly in the Susquehanna River led to a loss of credibility with the press and community.

In the end, the reactor was brought under control, although full details of the accident were not discovered until much later, following extensive investigations by both a presidential commission and the NRC. The Kemeny Commission Report concluded that “there will either be no case of cancer or the number of cases will be so small that it will never be possible to detect them. The same conclusion applies to the other possible health effects”. Several epidemiological studies in the years since the accident have supported the conclusion that radiation releases from the accident had no perceptible effect on cancer incidence in residents near the plant, though these findings are contested by one team of researchers.

Public reaction to the event was probably influenced by The China Syndrome, a movie which had recently been released and which depicts an accident at a nuclear reactor. Communications from officials during the initial phases of the accident were felt to be confusing. The accident crystallized anti-nuclear safety concerns among activists and the general public, resulted in new regulations for the nuclear industry, and has been cited as a contributor to the decline of new reactor construction that was already underway in the 1970s.

The incident was rated a five on the seven-point International Nuclear Event Scale: Accident With Wider Consequences.