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The Flash Crash: A Cautionary Tale

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So the finger that caused the “flash crash” May 6 turns out to have been merely heavy instead of fat. An order to sell $4.1 billion of stock index futures as quickly as possible, and never mind the price, spooked an already-jittery market into a spectacular selling frenzy that day according to a long-waited forensic report by the Securities and Exchange Commission that was released last week. The “hot-potato” selling among high-frequency trading programs that ensued cost the US stock market nearly $1 trillion in seven minutes, a 9.16 percent fall in the Dow Jones Industrial Average, before the broad