Federal regulators reported on Friday that the May 6 ‘flash crash’ which temporarily erased almost one trillion dollars of stock market equity was triggered by the trading actions of a single large house cat based in Chicago.
Although the cat is not named in the report, industry insiders believe that the feline in question is Mr. Wiggles, a large tortoiseshell owned by Roger Roberts, a futures broker and trader. The report concludes that while the trading activities of a single house cat would normally not be enough to move the markets, a confluence of events left the markets vulnerable to the cat’s aggressive trading strategy. It is rumored that Mr. Wiggles, or “Sir Wiggles” as the cat is now known, earned close to $200 million from trading that day.
“The price action of May 6 proves that the interaction between automated execution programs, algorithmic trading strategies and a frisky fifteen-year old feline can quickly erode liquidity and result in disorderly markets,” the report said.
According to the report describing that volatile day, the US stock market was already stressed as anxiety mounted over the debt crisis in Europe. The Dow Jones Industrial Average was down about two and a half percent at 1:30 pm when the owner of Mr. Wiggles, Roger Roberts, left his trading desk at home to pick up lunch at a nearby McDonald’s restaurant. He did not, however, lock down his trading platform. The cat, who is rumored to have been contemplating the possibility of a Greek bond default while resting on a sunny windowsill in the trader’s office, suddenly leapt onto the trader’s keyboard and began sending a series of large market orders to sell S&P 500 stock index futures.
Within a period of three minutes, Mr. Wiggles sold over 75,000 contracts, equivalent to almost $4 billion dollars, pushing the broader indexes down three percent. The sharp drop in prices led other traders to believe that a market crisis had occurred, and instead of waiting for more information, decided to sell as well. Within a period of several minutes, the Dow Jones Industrial Average shed over 600 points as several large automated trading programs sold thousands of additional contracts alongside the bearish feline.
Regulators then believe that a housefly caught the attention of the cat, causing it to step away momentarily from the keyboard. As the cat chased the flying insect around the desk, financial markets breathed a momentary sigh of relief until Mr. Wiggles jumped back onto the keyboard, sending another stream of market orders, this time to buy. The Dow Jones Industrial Average soon rallied over 500 points as the cat’s aggressive bullish posture pushed the market higher. As the cat finally captured and consumed its quarry, it had covered most of its earlier bearish position at a large profit while leaving the rest of Wall Street wondering what happened.
“When I left my desk, I had no opinion on the market,” said Roberts when interviewed later about the trades. “When I returned with my quarter pounder with cheese, Mr. Wiggles was sleeping on my chair, my account value was up by $187 million and Maria Bartiromo wanted to ask my cat what’s next for the gold market.”
As a flurry of investigations commenced into that day’s volatile trading, it is believed that Mr. Wiggles was shuffled into a private jet and flown to a château near Geneva, Switzerland to escape the glare of publicity. The cat subsequently announced the launch of The Fuzzy String and Crinkle Ball Opportunity Fund, a global macro hedge fund catering to wealthy European and Asian clients and is expected to speak at the World Economic Forum in Davos next year.
“Some people speculate that animals can sense when an earthquake is about to strike,” said SEC Chairwoman Mary Schapiro during a press conference following the release of the report. “What we’ve learned is that one very special cat can sense when a market earthquake is about to strike, and profit enormously.”