The Flash Crash: The Impact of High Frequency Trading on an Electronic Market
Andrei A. Kirilenko
Brevan Howard Centre for Financial Analysis, Imperial College Business School
Albert S. Kyle
University of Maryland; National Bureau of Economic Research (NBER)
University of North Carolina (UNC) at Chapel Hill - Finance Area
Federal Reserve Board
November 7, 2015
We study intraday intermediation in an electronic market before and during a period of large and temporary selling pressure. On May 6, 2010, U.S. financial markets experienced a systemic intraday event known as the Flash Crash. On that day, a large automated sell program was executed in the E-mini S&P 500 stock index futures market. We use audit-trail transaction-level data for the E-mini on May 6 and the previous three days. We find that the trading pattern of traders classified as the most active intraday intermediaries (High Frequency Traders) did not change during the Flash Crash.
Number of Pages in PDF File: 39
Keywords: High Frequency Trading, Algorithmic Trading, Flash Crash, Liquidity, Volatility, Price Impact, May 6, Intermediation, Market Making
JEL Classification: G12, G13, G18, G28
Date posted: May 27, 2011 ; Last revised: November 8, 2015
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