Computer-driven trade triggers May 6 "flash crash"

A computer-driven sale in the value of 4-billion-plus U.S. dollars by a single trader triggered the "flash crash" on May 6, U.S. regulators said Friday.

The market crash was caused by a trader's sell algorithm selling off 75,000 stocks in 20 minutes under stress on May 6, the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission said in a joint report.

At 2:32 p.m. New York time on May 6, against the backdrop of unsually high volatility and thinning liquidity, a large trader initiated a selling program to sell contacts valued at approximately 4.1 billion U.S. dollars, according to the report.

"One key lesson is that under stressed market conditions, the automated execution of a large sell order can trigger extreme price movements, especially if the automated execution algorithm does not take prices into account," said the report.

May 6 was also an important reminder of the inter-connectedness of the derivatives and securities markets, particularly with respect to index products, said the market watchdogs, but they did not name the trader.
(Source:xinhua)