Splash Crash

Definition of 'Splash Crash'


A hypothetical, more intense version of the flash crash that occurred on May 6, 2010, when the Dow Jones Industrial Average suddenly dropped by almost 1,000 points then recovered about 600 points within minutes. A splash crash is an extreme version of the flash crash which hypothetically would affect not just the equities markets, but also splash over into forex, commodities, bonds and other asset classes.

Investopedia explains 'Splash Crash'


The idea is that because of the interconnectedness of the financial markets and the use of high-speed trading platforms, a huge drop in one market could affect other markets. A splash crash could freeze exchanges, cause market liquidity to spontaneously evaporate and have a long-term detrimental effect on investor confidence. Market surveillance and intelligent algorithms that detect and respond quickly to market irregularities attempt to ward off such events and minimize the damage, if they do occur.



comments powered by Disqus
Hot Definitions
  1. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  2. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  3. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
  4. TIMP (acronym)

    'TIMP' is an acronym that stands for 'Turkey, Indonesia, Mexico and Philippines.' Similar to BRIC (Brazil, Russia, India and China), the acronym was coined by and investor/economist to group fast-growing emerging market economies in similar states of economic development.
  5. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all of the plan’s risk – e.g.: retirement payment liabilities to former employee beneficiaries. The plan sponsor can do this by offering vested plan participants a lump-sum payment to voluntarily leave the plan, or by negotiating with an insurance company to take on the responsibility for paying benefits.
  6. XW

    A symbol used to signify that a security is trading ex-warrant. XW is one of many alphabetic qualifiers that act as a shorthand to tell investors key information about a specific security in a stock quote. These qualifiers should not be confused with ticker symbols, some of which, like qualifiers, are just one or two letters.
Trading Center