It all started nearly 9 years ago to the day, when in April 2009 we wrote, “The Incredibly Shrinking Market Liquidity, Or The Upcoming Black Swan Of Black Swans“, in which we explained how as a result of the growing influence of HFT, quants and central banks, the market itself was breaking.

We also highlighted what the culmination of the market’s “breakage” could look like:

liquidity disruptions could and will lead to unexpected market aberrations, such as exorbitant bid/ask margins, inability to unwind large block positions, and last but not least, explosive volatility: in essence a recreation of the market conditions approximating the days of August 2007, and the days post the Lehman collapse…

We even laid out some likely catalysts for a possible market crash: “continued deleveraging in quant funds, significant pre-market volatility swings as quants rebalance their end of day positions, increasing program trading on decreasing relative overall trading volumes.”

One month ago, we saw all of the above elements briefly come together when on February 5 the market finally did break as its topology was torn apart by various, disparate elements, resulting in virtually all of the above materializing, if only for a short time.

To be sure, as time passed, others joined our warning that the market is becoming increasingly broken, with some of the most notable warnings coming from the likes of Bank of America’s Benjamin Bowler…

… who explicitly noted the market’s increasing fragility on numerous occasions…

… and how the Fed rushed to bail it out on every single occasion…

… as well as Fasanara Capital…

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