Biggest stock market crash caused by automated trading
Flash crash
Not Applicable ()
On May 6, 2010, at about 2:45 in the afternoon, the Dow Jones, an indicator of value on the US stock market, plunged by over 600 points (about 6 percent) – only to recover again 20 minutes later. The brevity of the event has led to it being nicknamed the "flash crash". An inquiry into the cause pointed the finger at "algorithmic trading" – a term for artificial intelligence computers executing trades automatically in accordance with pre-programmed rules. The speed of modern computers means this set of rules, the "algorithm", can run at tremendous speed, placing tens of thousands of trade orders in a fraction of a second the moment an opportunity is spotted. Trading on May 6 had already gotten off to a shaky start with the market falling by several hundred points. The inquiry concluded that this was then exacerbated by algorithmic trading systems rapidly selling up to cut their losses.