On May 6th, 2010, the New York Stock Market experienced what is now being called a “flash crash”, where the value of stocks suddenly fell, only to regain most of the lost value by the end of the day. In my opinion, this “flash crash” may not necessarily be an overall negative event, as it now exists as a warning to corporations and investors about the risks associated with taking advantage of price differences by buying a share only to instantly sell it to obtain a profit. Communication of market data needs to be improved across markets in order to prevent discrepancies that can lead to problems in instant trading. Another contributor to events such as this “flash crash” is immediacy of trading, caused by new technology such as Smartphones and other portable devices. This immediacy of information allows people to trade their share upon immediate notification of the share’s status. Overall, I believe that the “flash crash” will act as essentially a wake-up call for those who take advantage of the price differences in the stock market, buying and selling stocks at such a rapid rate that programming mistakes create serious negative effects.
http://www.economist.com/blogs/newsbook/2010/10/what_caused_flash_crash
http://www.economist.com/comment/678404#comment-678404
http://www.doobybrain.com/wp-content/uploads/2008/10/stock-market-the-ride.jpg
Report on “flash crash” incident can be found on The Economist online news article “One big, bad trade” (Oct 1,2010)