Advancing the Field of Quantitative Finance
formerly the IAFE

Event: The Flash Crash: The Impact of High Frequency Trading on an Electronic Market
Date: November 18, 2010
Time: 5:30 Registration
6:00 - 7:30 Event

7:30 Reception
Location:
PricewaterhouseCoopers

300 Madison Avenue
New York

International Association of Financial Engineers presents

 

The Flash Crash: The Impact of High Frequency Trading on an Electronic Market

November 18, 2010
5:30pm Registration
6:00pm-7:30pm Event

7:30pm Reception

PricewaterhouseCoopers

300 Madison Avenue

New York

Presented by

Andrei A. Kirilenko

Senior Financial Economist,

Commodity Futures Trading Commission

 

The Flash Crash, a brief period of extreme market volatility on May 6, 2010, raised a number of questions about the structure of the U.S. financial markets. In this paper, we describe the market structure of the bellwether E-mini S&P 500 stock index futures market on the day of the Flash Crash. We use audit-trail, transaction-level data for all regular transactions to classify over 15,000 trading accounts that traded on May 6 into six categories: High Frequency Traders, Intermediaries, Fundamental Buyers, Fundamental Sellers, Opportunistic Traders, and Noise Traders. We ask three questions. How did High Frequency Traders and other categories trade on May 6? What may have triggered the Flash Crash? What role did High Frequency Traders play in the Flash Crash? We conclude that High Frequency Traders did not trigger the Flash Crash, but their responses to the unusually large selling pressure on that day exacerbated market volatility.

Registration has closed for this event