SEC Report: Lessons Learned From the Flash Crash

Here are a few snippets of what the U.S. Securities and Exchange Commission believes it has learned about the “Flash Crash:” • “…under stressed market conditions, the automated execution of a large sell order can trigger extreme price movements…” • “…the interaction between automated execution programs and algorithmic trading strategies can quickly erode liquidity and result in disorderly markets…” • “…the staffs of the CFTC and SEC are working together with the markets to consider recalibrating the existing market-wide circuit breakers – none of which were triggered on May 6…” • “…many market participants employ their own versions of a trading pause – either generally or in particular products – based on different combinations of market signals…” • “…market participants' uncertainty about when trades will be broken can affect their trading strategies and willingness to provide liquidity…” • “…the events of May 6 clearly demonstrate the importance of data in today's world of fully-automated trading strategies and systems….” • “…another area of focus going forward should be on the integrity and reliability of market centers' data processes, especially those that involve the publication of trades and quotes to the consolidated market data feeds…”