As regulators scrambled to address the issues that arose in the wake of the 2008 Financial Crisis, they were confronted with yet another set of issues stemming from the market events of May 6, 2010, commonly referred to as the “Flash-Crash.” On that day, when U.S. stocks were already down 5 percent, around 2:40 p.m. the market began to plummet.1 Shares in Procter & Gamble fell 37 percent; shares of Accenture slid from $40 a share to trade at one cent. At one point, the Dow Jones average was down 998.50 points—its biggest intraday point drop ever—but bounced back to close down 347.80 points, or 3.2 percent.2
The recent extreme volatility in the stock markets during the sovereign debt crisis has been equally worrying to regulators and investors. Three developments in the public trading markets have been singled out as potential causes of this extreme market volatility. These are high-frequency trading (HFT), direct electronic access (DEA) and dark pools.
