Why There Was A Crazy Surge In Stock Market Activity At The Close Today

Nanex, Chicago-based market research firm, predicted that the market would go nuts at the close today about an hour and half before it happened.

Then, sure enough, around 4:00 e-mini contracts (those are S&P 500 futures) absolutely exploded.

Business Insider reached out to Nanex CEO Eric Hunsader to find out why he made that call. His explanation was actually pretty simple: He said it's the end of the month, indexes are changing out components, and everyone is piling into the market at the last second to get the most precise price

"The last few seconds are always hot," said Hunsader. "It's even worse at the end of the quarter. A lot of things are dependent on that end of the month price... and the closer you trade to the end (the closing bell), the closer you get to that price. There isn't necessarily a price you want, you just want to be at that right price."

Because of high speed trading technology, traders can get incredibly precise about when they execute their trades. That means normal end of the month sprint is getting cut down to smaller and smaller fractions of a second.

"It took almost a full second to get all that data through the networks so people could see it," Hunsader continued. "For speed traders that last second of the day is really valuable."

At the of the quarter, Nanex saw about 50,000 trades rush in for the last possible second (or less) of trading. This time it was 70,000.

"This is normal end of month nuttiness. Lots of times this is happening after the close. They (the contracts) don't show up on the prints until after 4:00 p.m.... It's almost like hiding it," he added.

So there you go. Since trades are being executed in smaller and smaller fractions of time, the pile-ons are getting more and more dramatic. Sounds like a new kind of normal problem.

In the chart below, you can see the dramatic deepening in the e-minis' depth of book (number of positions in the trade) at the close.