Over five years ago, the market events of May 6, 2010, commonly referred to as the “Flash-Crash,” were a case study in extreme stock market volatility. On that day at around 2:40 p.m., when U.S. stocks were already down 5 per cent, the market began to plummet.1 Shares in Procter & Gamble fell 37 per cent; 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
Although it took the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) over four months to analyze the causes of the Flash Crash and to issue a report of their findings (SEC-CFTC Report),3 the report made no mention of any actual or suspected manipulative activity as a possible cause of the Flash Crash. Financial regulators did, however, suggest that “stub quotes,” or placeholder prices, which often deviate from an actual market price, could have been a problem during the flash crash because some trades were executed unintentionally.4
