Loading ...One of these days something ten times bigger than that flash crash of 1000 points on the Dow is going to happen. Remember that day?? May 6th 2010. What happened to the old “market makers”? They would buy into extreme selling, and sell into extreme buying. To maintain some stability.
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ETFs are a “digital-age technology” governed by “Depression-era legislation.”
On April 21, 2015, nearly five years after the incident, the U.S. Department of Justice laid “22 criminal counts, including fraud and market manipulation” [10] against Navinder Singh Sarao, a trader. Among the charges included was the use of spoofing algorithms; just prior to the Flash Crash, he placed thousands of E-mini S&P 500 stock index futures contracts which he planned on canceling later.[10] These orders amounting to about “$200 million worth of bets that the market would fall” were “replaced or modified 19,000 times” before they were canceled.[10] Spoofing, layering, and front running are now banned.[3]
When new regulations put in place following the 2010 Flash Crash[9] proved to be inadequate to protect investors in the August 24, 2015 flash crash—”when the price of many ETFs appeared to come unhinged from their underlying value”[9]—ETFs were put under greater scrutiny by regulators and investors.[9] Analysts at Morningstar claimed in 2015 that,[9]
