live from the nasdaq marketsite i'm melissa lee. breaking news this hour. three stories we're all over tonight on this historic day on wall street. the new york stock exchange, america's stock market reopening after trading was suspended for more than three hours. plus china, the world's second biggest stock market, in the midst of a collapse. we'll tell you how big a threat this is to your money as we sit just three hours away from the open there. and we are following earnings as they kick off the season. alcoa out moments ago. we'll bring you the latest from that conference call. we start off with the big story of the year. the new york stock exchange halted for three hours. causing a flurry of chaos on the floor and markets around the world. >> you can see the screens that are on the posts all around the

floor now saying no quotation for just about every stock that we can see from post 9 where we are. i've never seen this happen. >> if you're just joining us, once again, we've not had a single stock trade here at the nyse since 11:32 a.m. eastern time. >> at this point there's no indication that malicious actors are involved in these technology issues. >> the plan is to open the market, roundabout 2:45, 3:00. >> these systems are big and very complicated. it doesn't surprise me it's an hour but at the same time it's a very long time for one of the major exchanges in the united states to be down. >> okay. wait a minute. tiles up. and are we up? we're up. we're getting trades? it looks like we are up. >> and they were. we've got team coverage on the floor of the exchange. bob pisani was there as it happened. joins us with the latest breaking developments and of course our own steve grasso, veteran floor trader, was right

in the thick of it. bob, let's start it off with you. >> well, the good news is the nyse says it was not a cyber security issue, it was not a cyber attack. that's the good news. they also say, tom farley says he does not believe there's a connection between what happened at united and what happened at the "wall street journal's" websites. again, they're still investigating that. but that's what they're telling us right now. here's the bad news. we don't know exactly what happened. we do know this. connectivity issues were happening right at the open of the new york stock exchange. a statement was put up by the nyse saying it was resolved very quickly. frankly we all forgot about it because it did not appear to be impacting trading at all. then at 11:32 the whole system just went down. i mean trading on the floor of the new york stock exchange, trading on archipelago continued. that's the nyse's electronic trading platform. as well as nyse listed stocks that traded off of the exchange. and that fragmentation really helped save the day because the market simply went right around the nyse floor. we did get back up again at 3:10 trading.

volume was on the moderately heavy side but remember we started a day where there was concerns about greece, there were concerns about china as well. s&p down 1 1/2%. that would bring heavy volume on a normal day. when you get this kind of situation as well, i think it was a little bit less volume than you would have anticipated. i think it did cause a little less trading but not dramatically. and again, that market fragmentation, which is the subject of much criticism, i think very much worked in the market's favor today. melissa? >> let me ask you this. the bottom line is the new york stock exchange does not exactly know what the issue is. and i ask this because there is a headline that crossed the wires about an hour and a half ago that said after of course trading was reopened that the new york stock exchange says the issue has been resolved. >> yeah. >> we don't know what the issue is. so is there a resolution? and do we have confidence that this is not going to happen again? >> well, we don't. look, the most likely explanation is there was some kind of coding error around a software update. the nyse and all the exchanges

routinely update their software systems. they have to just to make sure everything can connect to everything. this has happened in the past where they've done an update and there was a coding error and it causes a trading glitch. this is probably what happened at the open. they then fixed it. but in the process of fixing that error it caused other problems that eventually caused the market to shut down. these systems are extremely complicated and a simple coding error can cause problems. that's my feeling what the most likely explanation is. and the nyse's looking at this and i hope to be able to get some answers in the next 24 hours. melissa? >> bob, thank you. great reporting today. bob pisani on the floor. as we said, our own steve grasso down at the new york stock exchange as well. steve, 1132 happens, crosses, trading stops. what was it like? >> i was actually one of the first people to have the issue with my handheld on the floor, and i saw there was a latency in trying to pull back an order from the order book. so that's when the whole thing really started to spiral a little bit where i started to

see it was two stocks, five stocks, ten stocks, to a lot more concerning issues and that's when they shut down the whole floor. that to me is the blow to confidence that people see. even though they know there's other venues, this is the hub of financial capitalism of the world. that was the blow to confidence right there. >> is there any bit of fear in you tomorrow, steve, that this is going to happen again? >> you know me. i'm always paranoid. i always -- i fear something. i make up stuff to fear. but i will tell you the same thing that you said. i spoke to mr. farley. i spoke to tom farley. and i believe that it was that software update that bob had just spoke about. so i have to see the markets open again. this is no different than we had with flash crash, we had with the financial crisis. i need to see the markets open again. i need to see -- have confidence when i watch it a couple days in a row. >> all right, steve, stick with us. actually, steve's going to be with us for the entire hour. but let's talk about what this did to trade k for you guys.

karen, were you trading today? >> we're not big traders. so you know, that's not going to be a giant problem for us. but it does make me wonder about the franchise of the new york stock exchange itself. and to me what's most damaging is to them as a stock in that they had this business that people can look and say you know, i can go around, it i'll find a way around it. and what does that do to their franchise? >> what do you think? >> you did see that, right? because volumes weren't really down that much. you saw -- bob calls it fragmented. other people might call it a distributed system where you have multiple places where you can trade. in terms of what i did today, i'm probably a little more active than karen but one of the least active traders, and we also trade in maybe 100 different markets, 70 different countries, and it's not unusual to have a market go down here or there. and then they come back up. so for me it didn't have a huge impact but i thought it was interesting that volume stayed the same and the market just kept going. that gave me a bit of solace. >> and i would say that uncertainty is the big issue.

and steve mentioned the flash crash. and we all remember that. that was a very frightening period of time. so when you have this sort of disconnect no, pun intended here, from one of the main trading venues, it is a problem. and for me who trades options, which are a derivative of the underlying stock, you know, the immediate question is what does that do to derivatives that we know are much farther reaching, you know, so there was a lost uncertainty for probably about half an hour. and i think that was the biggest issue. so to me i think these are the sorts of things that to b.k.'s point distributed makes a lot of sense. >> we're in a market where we already had concerns about greece and contagion there, concerns about china, and then we have this. >> i've got to tell you, that headline was scary. zblai >> exactly. and that is the kind of environment from society that we're in today, and that is when you see the headline you assume the worst. but overall what does this do for investor confidence? it's not like the nyse halted and stocks continued trading and

there were winners because you know what, nasdaq's stock was down. e-trade financial was down. schwab was down. ameritrade was down. and they were down sharply. more so than the broader markets. >> i would say in terms of the confidence level unfortunately for steve i think this is more of a blow toward the new york stock exchange and less against the rest because when you're really looking at this we saw this smooth transition quite frankly and in the options market to dan's point when you're talking about that area i looked and i paid very close attention to this whole thing. we traded exactly what we normally would be trading. 2 million options basically in the hour when we were actually halted. 2 more million in the second hour. it was on the same pace that we had been on, mel. so from a derivative standpoint it was unaffected. new york stock exchange obviously they were halted but then they went to different areas. there's not quite a dozen. almost a dozen other areas where markets can do a lot of this trading and that's exactly what happened. i think from that standpoint people should be very comfortable on the fact the

markets work the way they're supposed to work, they were distributed out. now the new york stock exchange has to prove they aren't actually going to have more glitches in the future. >> steve grasso, what do you say to people who say this day proves the new york stock exchange isn't integral to the markets overall, to basic functioning? zbla couple of things. first of all, the new york stock exchange is still 98% of the openings and the closes. so that's where you get that composite. even though they are 14% or 14% to 20% depending on how you look at the numbers. the real events in the new york stock exchange are the opening and close. and to tom farley's credit he got the opening done, he got the close down. so i'm not so worried about it. it's the middle of the day that people know already that the marketplace is fragmented. people know where they have to go. but i'm not so concerned for the exchange. guys down here on the floor, we still have to interact with those other venues pete talked about. it's called the blue line rule. i have to be able to execute in every other venue. so as soon as i stop from the floor i start in all those other

venues. yes, it's a negative for the new york stock exchange but in a couple of days the same way the flash crash was an issue hopefully they can put it behind them. >> we'll check back with you, steve, a little later in the hour. in the meantime to button up this conversation for now brian kelly, if you want to put on an equity trade tomorrow morning do you put it on right at the -- do you say you know, what i'm going to trust that everything's going to open smoothly and it's going to be fine? >> yeah, i am. for me absolutely. and i think because you have this distributor system and because of the way it worked today it worked out very well. i would agree the headline when you have united airlines out, then you see the new york stock exchange, that was the first thing that went through my head, is okay, is this some kind of global cyber attack? when i heard it wasn't i felt a lot better. >> still ahead on "fast" a little over three hours away from the open in china. investors are on edge. here and there. the breaking news coverage continues right after this quick break.

welcome back to "fast money." while trading was halted at the new york stock exchange, the hearts of traders around the world skipped a beat as china's market fell into utter chaos. the shanghai composite index dropping 6% in today's session

despite ramped up efforts by beijing to stabilize its markets. the index has plunged more than 30% since highs hit in june. with chinese markets set to open in less than 3 1/2 hours the big question now is will china spawn a correction for u.s. stocks? brian kelly, where do you stand on this in terms of the normal contagion trades, which could be other emerging markets, which could be the australian dollar, et cetera, et cetera? >> for it to spawn a sustained correction here in the u.s. you're going to have to see a global slowdown in the economy. now, the economy's already been soft. it potentially could happen. there are some linkages. remember, china is a big customer of europe. europe's biggest export market is china. and then obviously we have a lot of global countries. you talk about something like apple where part of the investment theme there is china's going to come online. if the middle class and the savers in china start this kind of run on the shadow banks, then yes, you could have a problem. we don't know the answer to that. that's why i wouldn't necessarily go out and panic but those are things you have to watch for. >> are the markets already

telling us there's going to be an impact? take a look at the oil markets, copper markets, semiconductors to your point about china. i mean, they're down 2.7% today alone and that's on top of some of the selling that we saw previously, dan. >> well, to me you're talking about volatility and you're talking about unwind. so you mentioned commodities. we have fixed income. we have currencies. we've really seen extreme volatility and now global equities and the one market that has not seen it is the s&p 500. for all intents and purposes. there's a lot of money hanging out there. i don't believe china selling off 30% is a real reason to sell the s&p right now. i think there's a lot of things that have to happen. a credit contagion potentially in europe and then some sort of kind of economic hiccup that is associated with the stock market coming off in china. so to me right now u.s. continues to be a safe haven. i think if you want to play emerging markets right now i think you look at the eem, the etf that's also made up of a lot of other things other than china but it's definitely hong kong listed, there is some brazil in there and south korea.

samsung's the largest holding. >> the point about the s&p 500, though, down 1.7%, vix at 22%. is that -- >> i would say it's china, it's greece, it's puerto rico, it's all of these things. but it's oil -- i mean, it's a potpourri. we've been talking about the fact that multifaceted in terms of what's the pain right now in the market. i think if the earnings can start to come through, and i'm not talking about alcoa tonight, i'm talking about next week, we start to get into the big banks and all the rest of that, that can be something we at least hang our hat on. for now you look at the fxi, that volatility there went from 20 to 42 1/2, hit a two-week high of 44 and change. there's volatility in those chinese markets. obviously we've got ours here. we talked about it june 23rd. under 12 on the vix. here we are now pushing 19, getting up toward 20. i don't know that we're done yet because of all of the different reasons that are out there. i think there's still a little bit of pain when it comes to volatility in the market. >> for more on china let's bring in hsbc co-head of asian economic research frederick newman. he joins us live in hong kong.

we've got to warn you there's a little bit of a delay. so stick with us. frederick, great to have you with us. i want to first ask you because we've been talking about this notion of contagion, when it comes to all the measures that beijing is putting into place, doesn't that simply transfer the risk from the stock market to other pockets of the market? where should we be looking to? has a risk been taken on by insurance companies and mutual funds? >> that's right. but remember that the chinese market is predominantly a retail market. we have 80% of stocks being traded in china by retail investors. so the spillover to institutional investors in china perhaps not quite as large. the other thing to note about china is actually the market is frozen into place. remember, almost 50% of stocks are suspended currently. so we have our trading halt here in asia. you have yours in the united states. different reasons perhaps. but the price discovery process is still disrupted and it will take some time to sort that out.

and until the dust really settles it's going to be very difficult to have read across to institutional investors. >> does this mean, frederick, that there is going to be deeper pain felt amongst consumer discretionary names because the brunt of the risk is being taken on by the reemt investor? the interesting thing about the chinese stock market is the chinese government did so much to prop up this market including enabling more margin, leverage to be taken on buy retail investors. and here they are. they're getting taps on the shoulder, the margin calls. a lot of their stocks are locked up. they cannot liquidate those. they then start liquidating the blue chip stocks. these are desperate investors at this point. >> that's right. that is one of the big risks, is consumer discretionaries. tourism, which had been a growing area here. but the big, big risk perhaps is the real estate market. to what extent does the slowdown or sell-off in the stock market affect the real estate market in

china? we had seen a bit of a recovery in transactions in the last several months in china. remember, china's all about real estate market. now, if the stock market sell-off takes off some of these transactions, then that is going to be one of the biggest growth drags we could think of. and that would then have spillover effects into the global commodities space and ultimately also come back to the u.s. economy. >> fredric, it's karen. let me ask you, is there any precedence for this kind of action on behalf of the government to try to prop up the market? and if so, what happened in the wake of that? >> well, we have seen in 2007 when the market collapsed also a bit of support. measures not quite as aggressive as this time around. i think one key difference between the 2007 sell-off and today is that the real estate market in china was doing a lot better. this time around it's really just equities that have done fairly well.

elsewhere in the region remember interference in equity market is not uncommon. we had indifferent periods the last 20 years. hong kong, for example. usually help to stabilize investor confidence. here in china i think it will take another several weeks before we really see stabilization set in. because the market is just suspended at this point in time. >> we're just about out of time, frederic but i've got to ask you this last question. there had been a belief going into the sell-off that there was a beijing put, that they could do things to stabilize this market. we have not seen that pan out. do you think there are other measures that the government could in fact take to stabilize this market or is it a period of several weeks which you predict where the markets will have to iron themselves out? >> well, the big nuclear option is if the central bank makes direct money available for some government fund to buy stocks en masse on the market and targets perhaps a certain index level. but we think the chinese authorities are going to be very

careful with that because if you do go out too aggressively with an index target, say, then obviously if you don't hit that target that's going to cause even bigger problems. and remember beijing fundamentally has been trying to steer the economy to its more market-driven approach. we think that yes, they have bigger guns, so to speak, they could roll out. but they're not going to use them very quickly because they don't want to be caught short here trying to stabilize the market and the market doesn't respond. >> frederic, great to speak with you. hope you'll come back to the show soon. frederic neumann of hsbc. whenever we talk about nuclear option even if it's not an option the government's going to take, that's scary stuff. >> the bigger issue here is lack of confidence in the system which everybody was talking about where the whole reason to invest in china is they have all these levers to pull. well, they've pulled an awful lot of levers and it's not working. what concerns me most is china has a shadow banking system very similar to what we had here in the u.s. which is tied to not

only commodities but also real estate. and if that starts to deteriorate, then you've got a real problem. how do you trade it? i think you stay short oil, which i am short oil. the commodity space. short there. you get out of your stochz. those are the easiest ways for a u.s. investor to take advantage of this. >> just a couple days ago dan was positing that apple would be very hard hit. pete disagreed. pete, two days later we have apple down 2 1/2% in today's session. are you rethinking that perhaps yeah, you know what, that incremental buyer of an iphone is not going to be that incremental buyer. >> i wonder if that's a reaction or is it because of the fact that they go to their most liquid and some of their most profitable trades from earlier in the year and you want to start taking some of that off? i don't want to overread this. but i still think that the products are selling for apple. from that standpoint i disagree. >> we're going to get results in a couple weeks here. if they say china's slowing the thing's down ten bucks in a heartbeat. it's that simple. >> as we head to break take a look at a shot of the new york stock exchange. the scene for what was the story of the day.

we'll have much more on what happened and what was behind the haumt. plus what it means for your money. our coverage continues right after this break. >> trading is rumors and facts. when i come to the show, i spread the facts. >> everyone on the show is a professional trader. >> the easy money is going with consensus. the big money is made going with the countertrend. >> we're always trying to look for what's the next trade. not the obvious trade but what's the trade nobody has taken a look at, nobody has put on that you could put on tomorrow. >> "fast money," weekdays 5:00 eastern on cnbc. we live in a pick and choose world.

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19 cents per share just in. 3 cents shay of estimates. revenue was better than expected. the biggest surprise is commodity businesses aluminum, primary metals holding up better than analysts had anticipated given the drop we've seen in aluminum prices this year. alcoa reiterating its projection of 6 1/2% growth for aluminum globally in 2015.

and ceo claus kleinfeld telling cnbc that as economic growth slows in china that he's focused on what alcoa as a company can "control." >> the company that we are creating is a real powerhouse when it comes to lightweight multimaterials innovation. that's what we are creating there. at the same time we have a commodity business that just has to live with what's going on there. but as we bring it down the cost curve it doesn't matter so much what's going on in the rest of the world. one time we'll make a lot of money. the other time we make decent money. >> kleinfeld referring to alcoa's transtoigs a manufacturer of higher margin products for aerospace and aught. mid-stream and down stream segments making up 59% of sales for the quarter with aerospace revenue up 29%. also worth noting, the company hiking its outlook for heavy-duty truck and trailer market in north america. it expects that to grow 9% to 11% this year as orders increase. so taking a look at shares of alcoa in the after hours, those

are up just slightly, about a quarter of a percent. melissa, back over to you. >> thanks so much, morgan brennan. up quarter of a percent. that's after declining 5% and hitting a new 52-week low in the regular session. that sound bite from klaus kleinfeld i thought it was bizarre. >> it was a little bizarre. the one thing about alcoa is we have seen some activity. dan-u may have written about it but we've seen some activity previous to this, some pretty enormous put buys along the way as well. you always wonder are people looking for more down side? 52-week low, not much of a bounce back today. is there more down side for some of these commodities? >> he mentioned trucks. look at navistar. this one is making new five-year lows right now. i don't see that. and when you look at this thing, we did it last night on the show, alcoa $8. that's where it flatlined for a couple years. 10 1/2 here. there was not a whole heck of a lot of silver lining in this thing. that's probably where it goes if we don't see an uptick in global growth anytime soon. >> earnings season about to kick into high gear. big names reporting this week and next.

are earnings the best hope for stocks at this point? can we look past china? can we look past greece? forget about this trading halt or whatever you want to call it on the nyse. and say you know what? honeywell, citi, google, strong earnings, we're going to move past, it we're going to move higher. >> you can only look past that if you have rose-colored glasses on. the world has changed in the last couple weeks. last quarter's earnings are not going to matter whatsoever. >> really? >> we still have to resolve what's going on in europe. we still don't have a resolution to greece. maybe we will. but again, if china -- there is something going on in china besides just a stock market fall. the economy there is slowing, and it could slow a lot more. so if that's going to occur, that will impact multinational earnings. >> i half agree with you. i do think it somewhat matters what the earnings are. but i think it probably matters more what the outlook is. what are they seeing in their markets going forward? and that's going to be important for me to hear for a lot of our names. i do think that the banks will report a pretty good quarter. and volatility isn't terrible

for them. >> karen, i've got to tell you the banks are the most important to watch next week. we're going to get some of them and that's the sector that outperformed. they were trading really well when it looked like the fed was going to raise rates here. but obviously the situation in europe has caused a little volatility. we've seen citi come in hard, even jpmorgan's come in hard. if these stocks don't react to any good news it's lights out. i think we're back below 2,000 in the s&p. because that is the only -- the only bit of leadership that exists in the u.s. market right now. >> as an indicator of sentiment banks are of course an important part of the markets, but technology and what they say, especially about china, we're talking about companies that have 70% or more sometimes in some cases -- >> exposure. >> -- of revenue coming from china. what they say is going to tell us, give us a good read, decent read on whether or not there is in fact contagion going on -- >> and john malloy had an article just the other day talking about exposure to the asian markets, not just china but the asian markets in general. and of the top five three of them are in the technology space. i don't know that i agree on the technology side, though. i think actually the banks

between the fees, between the commercial mortgages, i think these numbers are going to be very strong. i think the bar is low, i think they go well over that. these stocks have some up side. >> coming up, while china's huge meltdown may have caught traders off guard, one man was sounding the alarm way before the mayhem began. >> in hong kong you've had some spillover liquidity from the mainland, but also had what we think is in the aggregate probably the largest pump and dump in history. >> coming up, carson block will tell us just how much more pain could come when he joins us for an exclusive interview. that's next. plus we'll head back to the floor of the new york stock exchange to find out exactly what happened behind the scenes when trading stops. much more "fast money" right after this break. then it would be easy to know everything about that one breed. but in fact, there are over three hundred breeds of dogs.

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. welcome back to "fast money." a wild day on wall street saw trading halted on the new york stock exchange for an unprecedented 3 1/2 hours. but stocks were trading on other exchanges, and it was not a pretty day for u.s. market. major averages taking a big hit on china fears and uncertainty in greece with the dow closing lower by 260 points. coming up in the second half of "fast" we will continue to bring you all the latest developments on today's historic outage from

our own steve grasso, who was on the floor all day at the new york stock exchange. but first let's get straight to china where strayed trading is set to begin just a few hours from now. cnbc's susan li is live on the ground in hong kong as investors anxiously await the open. susan, is there any signs of stabilization this morning? >> i think people sure hope so. they've been rushing in to buy a lot of protection on the down side. yesterday record turnover volume in options contracts here in hong kong. so you know there's a lot of concern. there's a lot of fear on the markets. you know, people here in hong kong, this is such an international institutionally, financially driven market, they thought okay, what's happening in china on the mainland is not going to affect us that much because that's more of an insular market. but yesterday we had the single worst session since 2008. and that really brought those concerns home here to hong kong and to a lot of the international investors here who were rushing to take out their money. some huge volumes yesterday.

talking to some investors looking at close to 6%, a selldown at the end of the session they said we got spooked by a lot of the sentiment that was coming out of beijing yesterday. they talked about panic. they talked about irrational selling. and when you're using that type of words, as the china securities regulator, you really spook a lot of investors. and hence you had a lot of drawdown in liquidity. now, is this going to recover the next few weeks? a lot of people say no, not at this point because it's a slower summer months here. people don't want to really hold risk into july and august. and they're waiting for more signals, more firepower to come from the central bank before they're willing to go back in and buy some of these shares. melissa? >> susan, what's the talk there? ironically, we are seeing the private markets up and running. we see basically the chinese version of air bnb, the chinese version of a property service raising private funding for valuations of $15 billion, u.s. dollars apiece. is there talk that perhaps investors are putting their money elsewhere and their risk is being transferred away from

the stock market but to other pockets of the economy? >> yeah, that's a good question. i was asking them where the money is going. they're saying we're going to hold cash for now, nowhere in the world looks great. but you know, maybe outside markets like europe. people are talking about europe once again instead of china. i don't remember a time in the last few years where europe looked better than china, but it looks like we're at this point. you know, when it comes to fund-raising nobody wants to get a market here in the next few months. we had 28 companies that were supposed to list in shanghai but because of the market volatility probably from some state pressure they've taken their ipos off the table, which in some ways was considered a bullish sign but still nobody wanted to buy it. but we're expecting the selling to continue for a while out here in the asia pacific. here in hong kong, china some say we could even get back to november levels. and november was a significant time because that's when that rally started in greater china markets. back to you. >> susan, thanks so much. susan li joining us from cnbc hong kong.

meantime, the china market meltdown isn't a surprise to one noted short seller. carson block making a bold call on "fast money" on june 1st saying china was the biggest pump and dump in history. his words. since then hong kong's hang seng has tumbled by more than 14%. carson block is back in a cnbc exclusive. he's the founding partner of muddy waters, an investment research firm. carson, always great to speak with you. the funny thing about pump and dumps, carson is usually when there is a huge market downturn that's when these pump and dumps are revealed. is that what's going to happen in hong kong? >> well, it's really tough to say. i think the timing of my saying that and the subsequent decline illustrates that it's always better to be lucky than good. in terms of my own personal little barometer with hong kong possible pump and dumps or alleged pump and dumps, i'm not short this company, but tlaz company listed in hk called

qiangchu sciences. it still has about a billion-dollar market cap u.s. and this is a company that is developing jet packs for use in the congo and invisibility cloaks. so look, i haven't gone deep into this company but i think when it's at a lot less than a billion-dollar u.s. market cap maybe that's a sign that the pump and dumps have played themselves out. >> yeah. i think you're on to something with the invisibility cloaks and the jet packs in the congo. obviously in the congo they don't need them. >> probably not. >> just joking, carson. but in terms of this call and the coincidence, whatever it is, with the actual decline, did you get in on the action? did you put into place some sorts that you had based on a fundamental thesis that you got right in the end? >> not directly. there are some companies that we'd been shorting that were u.s. listed chinese companies where, you know, we felt that

the fundamentals were horrible. and those companies had actually started to rib as the mainland markets really took off. with this thesis that oh, it's a company that seems to have no intrinsic value, maybe it will be taken private and relisted in shanghai at some ridiculous valuation. so it's nice to see the reversals there. but no, we didn't really add to risk just because calling the top on one of these on a market, especially a bubble, i mean, is impossible. and let me be clear. the chinese government is trying everything it can think of to yoke the market back up. maybe they'll succeed. it's risky. i mean, so i'm not really looking to pour risk on at this point just from a macro perspective. >> hey, carson, brian kelly. i'm curious. a lot of people are saying it's going to take weeks for the chinese market and hong kong to recover. do you subscribe to that? could it be longer than that

before the confidence comes back? or will they be able to pump and dump it again? >> i feel like we're really in uncharted territory, which i guess on financial tv there's always something to talk about every day in which we're in uncharted territory. but with china what's interesting here is that for the past couple of decades chinese investors, chinese public have built up this perception that their government is omnipotent and that if it wants an asset price to go up that asset price will go up. and that's being dented here. i mean, how severely that's being dented i really don't know. but this could have -- this should have profound impacts for market psychology in china. just how long it takes to set in and how long it would take the government to overcome this blemish is anybody's guess. >> a noted short seller you are, carson, of chinese stocks.

does not want to pour on risk by shorting chinese stocks. that speaks volumes. so before you go, carson, what sort of areas of the market are you looking towards for your next idea? >> well, we're always looking globally. you guys were just talking about europe. europe's actually interesting from a short perspective. and we've been spending a little bit of time looking there, just kind of feel that investors and maybe even regulators have been fairly complacent there for some time. so from the perspective of the type of things we like to short where there's some management, maybe wrongdoing or just pulling the wool over shareholders' eyes, europe could be interesting in that regard. >> all right, carson, we hope you'll come back and tell us more about the idea when it comes through. carson block of muddy waters. we appreciate your time. what do you think? >> we've been talking about it for a while. countertrend realities can be very violent. you're going to get one sooner or later in china. one of the things, the etfs i've been looking at very closely is

the ashr. it tracks the a shares here and it's very correlated to the shanghai. i think 3500 in the shanghai is really important support. it was a level they broke out from in february, and it's down there now. if we get a rally back up, i don't know, 10%, 15%, i know that sounds crazy. that could happen in two trading sessions. i think you want short rallies here if you're a nimble trader and you know how to do it define your risk. >> you've got to be super nimble. when i think about our internet bubble and it was obviously mammoth, and i think we did a good job of just letting the chips fall where they did without any kind of support. i'd be way more afraid of this market now than post bubble. >> because it's not a free market. >> because it's not a free market. you don't know what the rules are. >> and i think that goes to the point of a loss of confidence because the rules were the government's going to support it. well, now they can't. so for my book this is going to take years to play out, not weeks, not months.

>> the new york stock exchange halt ford more than three hours today. how exactly does a trade go bad? steve grasso will join us to explain what went wrong and if we could see something like this again. much more coverage ahead on "fast."

so what exactly happens to a trade when an exchange is halted? does it disappear into thin air? obviously not. grasso's got a play by play for us on how each and every trade is executed. 386. how does it happen? >> think about it this way. we execute on the floor for buy side accounts and sell side accounts. so that means that your mutual funds, your pension funds, your hedge funds will route orders directly to the floor. so they use pipes to get in here. now, either it goes to a broker or it goes directly to an exchange employee, a market maker. i shouldn't say exchange employee. a market maker for one of the big banks. so you're showing the graphic up top. if it goes to a broker, i take that order. i use the strategy that the customer wants me to use, and i route it out to the actual book. now, what happens when the exchange gets halted is you get caught up in a queue, in a pending order status. and that's the scary part. so lucky for me, i was able to pull my orders out before this glitch happened. most people weren't able to do that. so there was thousands of orders

that were caught in the queue, and that's where it gets frantic and that's where it gets a little chaotic because the customer doesn't know what their order is doing, so they can't go to another venue to actually execute it. so that's where it gets a little nerve-wracking. o'even though there are other venues where you could execute that's the one stick point customers have to deal with. >> so you were able to pull some of your trades out of the queue before that halt happened, and so therefore you routed them to different exchanges? >> exactly. so i routed them around the new york, which is what most people did on the outside world as well. so someone, for instance, karen, who was routing orders when the new york was closed or bk, they were able to route their orders to different venues and different exchanges and different dark pools. that was actually good. and i think tom farley will be the first to tell you that he'd love to have every order routed here but fragmentation actually worked to his benefit. because at the end of the day he cares about the investor because that would have been a much bigger headache for him if

customers were locked up in a log jam at the new york. >> and then that cue you're talking about, it's just sort of that little period where we didn't know what was going on and those trades were not yet canceled. that was the panic moment for investors? >> that's exactly -- >> once they get canceled, then they can re-enter a trade and it can get routed elsewhere. >> exactly. if you routed 1,000 shares or 10,000 or 100,000 shares and you were caught in that state where you were in a pending status and you had no idea, you weren't getting executed but you couldn't take control of that order. so you wouldn't be able to route it somewhere else. so that was the crucial time where the exchange wanted to make sure that they did it purposeful and correctly. so they drained the systems and they wanted to do it a little slower. so they wanted to make sure they got every order instead of trying to do it in a rapid fashion and have an error during the process. >> steve, always great to speak with you. thanks for your insights today. get some rest. i'm sure it was a tough day. steve grasso joining us from the floor of the new york stock exchange. what, if anything, changes

tomorrow for you? >> i think the important thing, back to steve for just one moment, was we saw the volatility go up pretty dramatically from the time that they halted, and then i think it started to actually come back after they finally did say hey, they've all been cleared. which is a really key point because as steve mentioned they're stuck in the queue. they're just spinning. people don't know is my order there, is it live, is it going to come live, when is it going to be able to come out? once they got that i think it at least gave them some confidence in the order itself. in terms of tomorrow as i said earlier in the show i think we're going to continue to see more and more volatility, i think we get over 20, doesn't mean we go lower first but i think we get over 20. there's just too many elements going on in the market right now. >> coming up, shares of alibaba down more than 25% this year. we'll tell you why one trader's besting on another huge drop in that stock. much more "fast money" straight ahead. can a business have a mind?

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really goofy action today in alibaba. put volume was four times average daily volume. a lot of it came in some way, way out of the money puts when the stock was 77.40. that was a new all-time low in the stock. there was a buyer of 12,000 of

the september 50 puts paying 15 cents. $180,000 in premium that has basically a zero problem bilt of being in the money. that's at least what the options market is saying. but obviously huge leverage to the down side if you get a big move. if you want to just come over here and look at the chart, this $80 level was obviously a very huge level. it broke there. it's trying to hold here. but when you think about it, this was a $68 ipo price. we know in september the one-year anniversary of the ipo, 1.4 billion shares are coming off lockup. maybe this is just as pete would call it a little fairy dust trade. if you get a move to the down side, maybe you make multiples of it. but this is not the smart protection trade you want to do if you're long alibaba. buy puts are $28 out of the money. >> given the concerns about china and the chinese consumer, is there a reason to own yahoo!? >> i would say no. not right now. maybe at another time but absolutely not right now.

to dan's point, fairy dust or not, this is something that's way out of the money. we talked the other day about why are people selling certain names. i think you look for the volume, you look for liquidity, alibaba's one of those type of names where we've seen some of that volume go up because of the liquidity, and somebody really expecting a major move to the down side. that's not protection, dan, right? >> no way. >> just a quick update. i bought puts. so the bottom is in. >> you bought puts on alibaba. >> right. >> coming up next, the final check on the floor of the new york stock exchange. plus your first move tomorrow. we'll come right back. stay tuned. here at td ameritrade, they work hard. wow, that was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that.

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say hello at intelligent.schwab.com serious concern right under our nose. i'm going to fill you in. plus my interview with klaus kleinfeld from alcoa. "mad money" is next. final check with 386 on the floor of the stock exchange. steve, what are you looking for tomorrow morning? >> you know, if you look at the way the action was in the s&p, we wound up selling off and then when the market on the new york was halted you saw the market sort of rally back over the course of a couple of hours. but what was interesting to me was when you saw the market sell off, once that news of a 2:30 test of the marketplace and a hopeful 3:00 resumed trading was indicated for the investment community you saw the market sell off. we sold off 75 bips.

so 3/4 of a percent in pretty quick order. for me i'm looking to see if the market holds. the good news is if you look at the cash, 20.44 on the cash is the number we held. that was the recent low. and we're right there. it's 2046. we have to hold that level. so i would assume there's guys in this building, and i've seen them, still working on this issue. tomorrow we could see a little bit of a relief pop but i'm looking for some weakness going forward. >> thanks for joining us this hour. always good to see you. steve grasso from the floor. let's go to the floor, dan nathan. >> if you get that break of 2054 grasso's looking for a name on my raid radar is home depot. it's a teflon stock. >> brian kelly. >> everybody's going to be watching china but i'm watching japan. the cme just raised their margins on the nikkei. that could cause some deleveraging. dxj, you get out of that tomorrow. >> quairn finerman. >> we like performance sports group which announced today and they've done a pretty good job with their business. you don't need to jump in tomorrow. you can see the way the world's looking. but i like it.

>> pete najarian. >> i love these health care names. and lilly today again traded just about the 52-week highs, sold off because of what's going on in china and everywhere else. i think this name bounces back. i think it establishes a new high. >> i'm melissa lee. thanks for watching. see you back here tomorrow again for my mission is simple, to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere, and i promise to help you find it. "mad money" starts now. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends, and i just want fewer days like today, my job is to teach and call me, 1-800-743-cnbc or tweet me @jimcramer. what a day. let me give you a different spin from what you might hav