45 Pages Posted: 26 Jun 2010 Last revised: 22 Aug 2013
Date Written: July 2013
During the Flash Crash on May 6, 2010, a short period of high stock market volatility, some stock prices declined to $0.01, while others increased to $100,000. Examining Intermarket Sweep Orders (ISO) before, on, and after May 6, we find that ISO use is substantially higher on May 6. For those stocks whose prices fell the most, over 65% of the sell volume comes from ISOs. During the price recovery period for these stocks, about 53% of the buy volume comes from ISOs. We believe that the unusual behavior of ISOs contributed to the sudden drop and recovery of the market.
Keywords: Regulation NMS, Market Quality, Sweep Order, Flash Crash
JEL Classification: G14, G18, G19
Suggested Citation: Suggested Citation
Wood, Robert and Upson, James and McInish, Thomas H., The Flash Crash: Trading Aggressiveness, Liquidity Supply, and the Impact of Intermarket Sweep Orders (July 2013). Available at SSRN: https://ssrn.com/abstract=1629402 or http://dx.doi.org/10.2139/ssrn.1629402
By Frank Zhang