Sunday, May 8, 2011

Flash Crash: One year later

On May 6, 2010, as global markets were concerned about the debt crisis in Greece, U.S. equity markets dropped about 9% within 5 minutes. Over the past year, U.S. government regulators have implemented procedures to minimize the potential of another "flash crash" but concede that much work remains to be done in this area.

MY TAKE: Concerns persist in an environment where 1) exchanges are increasingly dependent on the revenues of high-frequency trading operations, 2) the U.S. Securities and Exchange Commission (similar to many government agencies) is suffering from budgetary constraints and 3) the expanding use of technology will likely continue to result in unexpected problems. Note: There are concerns that some of the downward move in commodity prices this week was exacerbated by the use of computerized systems.

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