Posts Tagged ‘market crash’

Culprit In ‘Flash Crash’ Identified

Monday, October 4th, 2010

How one company broke the Internet stock market.

  • The SEC and FTC just completed their report on the May 6th “flash crash” that resulted in a sudden loss of more than 600 points on the Dow Jones Industrial Average. The market rebounded, but not before a few trader meltdowns.
  • The report says that the crash resulted from a single big trade, which happened to be executed on a day when the market was already unstable due (in part) to fears about European debt.
  • Apparently a large trading company (which the WSJ identifies as Waddell & Reed Financial, a mutual fund company in Kansas) sold tens of thousands of futures contracts using a computer trading program. The sudden sale scared day traders into dumping their futures contracts and further destabilizing the market.

Facts & Figures

  • The DJIA’s 600-point crash was its fastest decline ever.
  • The trade in question involved selling over $4 billion in futures contracts at one time.
  • A total of 75,000 futures contracts were sold.