Flash Crash

AAA

DEFINITION of 'Flash Crash'

The quick drop and recovery in securities prices that occurred shortly after 2:30pm Eastern Standard Time on May 6, 2010. Initial reports that the crash was caused by a mistyped order proved to be erroneous, and the causes of the flash crash remain unknown. Both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have investigated the incident.

INVESTOPEDIA EXPLAINS 'Flash Crash'

The SEC and CFTC released a preliminary report on the flash crash incident on May 18, 2010. The report gave several working hypotheses, but failed to identify a single cause for the incident. Securities exchanges canceled 21,000 trades that were executed at unexpectedly low prices during the crash. On June 10, 2010, the SEC voted unanimously to enact new rules which automatically stop trading for any stock in the S&P 500 whose price changes by more than 10% in any five-minute period.

RELATED TERMS
  1. Quote Stuffing

    A tactic of quickly entering and withdrawing large orders in ...
  2. Stub Quote

    Order placed well off a stock's market price. Stub quotes are ...
  3. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock ...
  4. Stock Market Crash Of 1929

    A severe downturn in equity prices that occurred in October of ...
  5. Stock Market Crash Of 1987

    A rapid and severe downturn in stock prices that occurred in ...
  6. Circuit Breaker

    Refers to any of the measures used by stock exchanges during ...
RELATED FAQS
  1. Do negative externalities affect financial markets?

    In economics, a negative externality happens when a decision maker does not pay all the costs for his actions. Economists ... Read Full Answer >>
  2. What is the difference between disposable and discretionary income?

    According to the Bureau of Economic Analysis, or BEA, disposable income is the amount of money an individual takes home after ... Read Full Answer >>
  3. What are some of the major regulatory agencies responsible for overseeing financial ...

    There are a number of agencies assigned to regulate and oversee financial institutions and financial markets, including the ... Read Full Answer >>
  4. What are the major laws (acts) regulating financial institutions that were created ...

    Presidents George W. Bush and Barack Obama, in conjunction with Congress, signed into law several major legislative responses ... Read Full Answer >>
  5. What are the similarities and differences between the savings and loan (S&L) crisis ...

    The savings and loan crisis and the subprime mortgage crisis both began with banks creating new profit centers following ... Read Full Answer >>
  6. What measures could the U.S. Government take to prevent another crisis similar to ...

    Some of the measures that the U.S. government can take to prevent another crisis similar to the savings and loan (S&L) ... Read Full Answer >>
Related Articles
  1. Home & Auto

    Key Reasons To Invest In Real Estate

    There has been a lot of negativity over the real estate sector since 2008. Here are the reasons why you should be investing in it.
  2. Active Trading

    Connecting Crashes, Corrections And Capitulation

    Even though crashes, corrections and capitulations are bad news for investors holding the stock, there are still ways to profit.
  3. Forex Education

    October: The Month Of Market Crashes?

    In the finance world, October is a month to be feared, but is it justified?
  4. Active Trading Fundamentals

    The Fall Of The Market In The Fall Of 2008

    How did America's strong economy tumble so quickly? Find out here.
  5. Personal Finance

    The Crash Of 1929 - Could It Happen Again?

    Learn about the series of events that triggered the Great Depression.
  6. Economics

    What Caused The Great Depression?

    Learn how government actions may have contributed to this major economic downturn.
  7. Economics

    A Comparison Between a Default and a Collapse

    Is the Greek default similar to the Lehman Brothers collapse?
  8. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P 500 Trust

    Find out more about the SPDR S&P 500 ETF Trust, the characteristics of the exchange traded fund and the suitability of investing in the fund.
  9. Professionals

    Target-Date vs. Index Funds: Is One Better?

    Target-date and index funds are difficult to compare because they differ in both structure and objective, though investors can compare two specific funds.
  10. Mutual Funds & ETFs

    Investing in Frontier Markets: Top African ETFs

    A relative analysis of Africa-focused ETFs that enable investors to tap into the immense potential of growing African economies, which are increasingly accounting for a larger share of global ...

You May Also Like

Hot Definitions
  1. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  2. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  3. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  4. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  5. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  6. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!