Abstract

http://ssrn.com/abstract=1686004
 
 

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


Andrei A. Kirilenko


Massachusetts Institute of Technology (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

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Date posted: May 27, 2011  

Suggested Citation

Kirilenko, Andrei A. and Kyle, Albert S. and 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

Contact Information

Andrei A. Kirilenko (Contact Author)
Massachusetts Institute of Technology (MIT) Sloan School of Management ( email )
100 Main Street
E62-612
Cambridge, MA 02142
United States
HOME PAGE: http://mitsloan.mit.edu/faculty/detail.php?in_spseqno=54152
Albert (Pete) S. Kyle
University of Maryland ( email )
College Park, MD 20742
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Mehrdad Samadi
University of North Carolina (UNC) at Chapel Hill - Finance Area ( email )
Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
Tugkan Tuzun
Federal Reserve Board ( email )
DC 20551
United States
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