SEC: Retail Traders More Active During May 6 `Flash Crash'
By Fawn Johnson, Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- A large number of trades broken from the May 6 "flash crash" were from retail traders because most professional traders had temporarily pulled out of the market, a Securities and Exchange Commission staffer said Wednesday.
The SEC and the Commodity Futures Trading Commission this fall will spell out the types of stocks that experienced broken trades as a result of the May 6 incident, when the Dow Jones Industrial Average fell nearly 1,000 points before partially recovering.
The SEC and CFTC plan to complete by September a final report on what happened on May 6, CFTC Chairman Gary Gensler said at a hearing on the flash crash.
"What we are seeing is that most professionals had exited the market" during the volatile afternoon half hour on May 6, said SEC staffer Gregg Berman, who is among the regulators examining the market data for clues to what happened.Read more:
http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201008111252dowjonesdjonline000475&title=secretail-traders-more-active-during-may-6-%60flash-crash#ixzz0whRfZzkf......................
We had our Technology Advisory Committee in this room last month and I asked the experts if this type of thing
(High Frequency Trading programs taking advantage of price disparities due to delays in quote reporting) was possible or if it was just a conspiracy theory. Four of the panelists assured me that this could take place.
In fact, they even acknowledged that some algorithmic programs were geared to not only take advantage of market circumstances, but could be used to instigate certain market conditions in order to then initiate their own program of buying or selling.http://www.cftc.gov/PressRoom/SpeechesTestimony/CommissionerBartChilton/chiltonstatement081110.htmlIt now appears that professional traders exited the market during the stormy period. That certainly would reduce liquidity. The result is that retail traders, you and me trying to manage our 401(k)s and IRAs, took the losses. Some of the trades were canceled, those in which the price was 60% above or below the price of the instrument at 2:40. That will help some of the people who traded ACN, but not those who traded PG and about 200 other stocks.
more:
http://firedoglake.com/2010/08/15/professional-traders-exited-market-before-flash-crash/