The Flash Crash: High-Frequency Trading in an Electronic Market

Kirilenko, Andrei A.; Kyle, Albert S.; Samadi, Mehrdad; Tuzun, Tugkan

doi:10.2139/ssrn.1686004

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The Flash Crash: High-Frequency Trading in an Electronic Market

Journal of Finance, Forthcoming

42 Pages Posted: 27 May 2011 Last revised: 18 Apr 2017

See all articles by Andrei A. Kirilenko

Mehrdad Samadi

Board of Governors of the Federal Reserve System

Tugkan Tuzun

Board of Governors of the Federal Reserve System

Date Written: January 6, 2017

Abstract

We study intraday market intermediation in an electronic market before and during a period of large and temporary selling pressure. On May 6, 2010, U.S. financial markets experienced a systemic intraday event - the Flash Crash - where a large automated selling program was rapidly executed in the E-mini S&P 500 stock index futures market. Using audit trail transaction-level data for the E-mini on May 6 and the previous three days, we find that the trading pattern of the most active nondesignated intraday intermediaries (classified as High Frequency Traders) did not change when prices fell during the Flash Crash.

Keywords: High-Frequency, High Frequency Trading, Algorithmic Trading, Flash Crash, Liquidity, Volatility, Price Impact, May 6, Intermediation, Market Making

JEL Classification: G12, G13, G18, G28

Suggested Citation: Suggested Citation

Kirilenko, Andrei A. and Kyle, Albert (Pete) S. and Samadi, Mehrdad and Tuzun, Tugkan, The Flash Crash: High-Frequency Trading in an Electronic Market (January 6, 2017). Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1686004 or http://dx.doi.org/10.2139/ssrn.1686004