Analysis of the “Flash Crash”
Date of Event: May 6, 2010
Publication Date: June 18, 2010

07-08-2010: We have added new data and information regarding the Flash Crash. In order to keep our report in-tact as originally published, please CLICK HERE for all new Flash Crash related information from Nanex.

On the afternoon of May 6, 2010 the Dow Jones Industrial Average (DJIA) dropped approximately 600 points (5.7%), and then quickly recovered. Other Major Market Indexes dropped by similar amounts. We have read numerous articles attempting to explain this event including the SEC report “Preliminary Findings Regarding the Market Events of May 6, 2010” dated May 18, 2010. Our report assumes the reader is familiar with the SEC report.

Our business is supplying a real-time data feed comprising trade and quote data for all US equity, option, and futures exchanges. We have archived this data since 2004 and have created and used numerous tools to help us sift through the enormous dataset: approximately 2.5 trillion quotes and trades as of June 2010. May 6th, had approximately 7.6 billion trade, quote, level 2, and depth records.

We generated over 4,500 datasets and over 1,200 charts before uncovering what we believe precipitated the swift 600 point drop beginning at 14:42:46 and ending at 14:47:02. The following are the results of our findings.

 

Complete Text

Complete text write up of our analysis.

Part 1: Events of 05/06/2010

Specific events occurring on 05/06/2010, text and supporting charts.

Part 2-a: Previous Occurrences

Previous occurrences of quotes reported incorrectly for the entire market, text and supporting charts.

Part 2-b: Previous Occurrences, NYSE Quotes

Previous occurrences of quotes reported incorrectly for individual stocks, text and supporting charts.

Part 3: The Evidence

Evidence of quote delay for individual stocks on 05/06/2010, text and supporting charts.

Part 4: Quote Stuffing

Examples of quote-stuffing, text and supporting charts.

Part 5: Crash Myths

We examine other theories regarding the flash crash.

Recommendations

Our recommendations to prevent another “flash crash”.

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