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File name: SSRN-id1853768. ; Size: 7138K
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The Flash Crash: The Impact of High Frequency Trading on an Electronic Market
Andrei A. Kirilenko
MIT Sloan School of Management
Albert S. Kyle
University of Maryland; National Bureau of Economic Research (NBER)
Mehrdad Samadi
University of North Carolina (UNC) at Chapel Hill - Finance Area
Tugkan Tuzun
Federal Reserve Board
May 26, 2011
Abstract:
The Flash Crash, a brief period of extreme market volatility on May 6, 2010 raised questions about the current structure of the U.S. financial markets. We use audit-trail data to describe the structure of the E-mini S&P 500 stock index futures market on May 6. We ask three questions. How did High Frequency Traders (HFTs) trade on May 6? What may have triggered the Flash Crash? What role did HFTs play in the Flash Crash? We conclude that HFTs did not trigger the Flash Crash, but their responses to the unusually large selling pressure on that day exacerbated market volatility.
Number of Pages in PDF File: 64
Keywords: High Frequency Trading, Algorithmic Trading, Flash Crash, Liquidity, Volatility, Price Impact, May 6
JEL Classification: G12, G13, G18, G28
working papers series
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Date posted: May 27, 2011
Suggested CitationKirilenko, Andrei A., Kyle, Albert S., Samadi, Mehrdad and Tuzun, Tugkan, The Flash Crash: The Impact of High Frequency Trading on an Electronic Market (May 26, 2011). Available at SSRN: http://ssrn.com/abstract=1686004 or http://dx.doi.org/10.2139/ssrn.1686004
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