The flash crash of 6 May 2010: what happened minute by minute

1. 6 May, morningWorries about Greek government debt weigh on markets. Share prices fall through the day and the supply of buy and sell orders thins.
2. 2:32 pmA large investment firm starts a computer program to sell 75,000 E-mini futures contracts. The program is set to follow the volume of trading, without regard to price or time.
3. 2:41–2:44 pmFast-trading firms that had bought from the program sell in turn. Contracts pass rapidly between them with few outside buyers, and the E-mini price falls quickly.
4. 2:45:28 pmA safeguard on the Chicago exchange pauses E-mini trading for five seconds. When trading resumes the price steadies and begins to rise.
5. 2:45–3:00 pmIn the share market many firms withdraw. Some shares and exchange-traded funds trade at a penny, and others at $100,000. The Dow is at one point nearly 1,000 points below the previous close.
6. About 3:00 pmMost prices are back near their levels of half an hour earlier. The Dow ends the day about 3% lower.
7. 6 May, eveningThe exchanges agree to cancel trades made at prices more than 60% away from their level just before the fall: more than 20,000 trades.
8. June 2010Trading pauses for individual shares are introduced as a pilot: a share that moves too far in a few minutes is halted briefly.
9. 30 Sept 2010The staffs of the two regulators, the Commodity Futures Trading Commission and the Securities and Exchange Commission, publish their joint report on the day.
10. April 2013The “limit up, limit down” mechanism begins to replace the pilot, and revised market-wide circuit breakers take effect, set at falls of 7%, 13% and 20% in the S&P 500.

• Trading pauses for single shares were introduced within weeks, and were replaced from April 2013 by the “limit up, limit down” mechanism, which prevents trades outside a moving band around a share’s recent price.
• “Stub quotes”, the placeholder quotations at absurd prices that had produced the penny trades, were banned.
• The market-wide circuit breakers were revised: they are now triggered by falls of 7%, 13% and 20% in the S&P 500 index.
• Clearer rules were written for cancelling trades made at clearly erroneous prices, and regulators began building a single record of all orders across American share markets.

• A great deal of trading is not the same as a deep market. Volume was very high during the fall, yet there were almost no real buyers; the same contracts were passing back and forth.
• A market order is filled at whatever price is available. During those minutes the available price for some shares was a penny, and orders were filled there.
• A stop order becomes a market order once its level is reached. In a market that is gapping, the price at which it is filled can be far from the level that was set.
• Those who supply prices in normal times can stop. Liquidity that is offered voluntarily is withdrawn when it is most needed.
• A pause of five seconds was enough to break the fall in the futures market. Much of the rule-making that followed is built on that observation.

These are observations about how markets and rules work, drawn from one episode. They are not advice, and they do not say that anything like it will or will not happen again.

It is easy to judge an episode once its ending is known. This exercise takes three moments from the timeline above, one at a time. At each it shows only what had been made public by then, asks a hypothetical question with three plain choices, and then shows what came next and what each choice would have meant.

The text headed “what had been made public by then” is this site’s own summary of the record, written afterwards. It is not a contemporary document and nothing in it is a quotation. The position described is imagined. No choice is marked right, there is no score, and nothing is stored.

A hypothetical for study, not advice. It does not say what anyone should have done then, or what to do now.

The times, the size of the sell program and the count of cancelled trades come from the regulators’ joint report. All times are Eastern Time. The report’s emphasis on the one large sell order has been challenged by other studies, which give more weight to the fragile state of the market that afternoon and to the behaviour of fast-trading firms. In 2015 the American authorities also brought a case against an individual trader for placing and cancelling orders to mislead the market; how much that contributed on the day is disputed.

What caused the flash crash of 2010?

The regulators’ joint report traced it to a large automated order to sell 75,000 E-mini S&P 500 futures contracts, begun at 2:32 pm Eastern Time in an already nervous market, and to the reaction of fast-trading firms, which first bought and then sold on. Other studies give more weight to the thin state of the market that afternoon. The causes are still debated.

How long did the flash crash last?

The steep fall and most of the recovery took about twenty minutes, from roughly 2:40 pm to 3:00 pm Eastern Time on 6 May 2010. The futures price turned after a five-second trading pause at 2:45 pm.

Were trades during the flash crash cancelled?

Yes. That evening the exchanges agreed to cancel trades made at prices more than 60% away from their level just before the fall. More than 20,000 trades were cancelled. Trades at prices within that limit stood, however unfavourable.

• Liquidity
• Slippage
• Stop Loss
• Volatility
• Index
• Gap
• Liquidity Provider

The joint report of the staffs of the Commodity Futures Trading Commission and the Securities and Exchange Commission, published on 30 September 2010, and the regulators’ later rule filings.

A number is given on this page only where it is famous and certain. Nothing here is a quotation.