On May 6 2010 investors were stunned when the Dow Jones plunged 1,000 points (almost 6 per cent) before recovering – all in 20 minutes. Dubbed the “flash crash” market participants and regulators were immediately trying to identify the culprits. During the flash crash a large sell order triggered a high-speed selling frenzy among the high frequency traders that dominate the futures and equities markets. It took about five minutes for markets to hit bottom, erasing almost $1tn in market value. Markets then recovered just as quickly and just as mysteriously.
In February 2011 an advisory panel convened to investigate the flash crash recommended rule changes that would oblige high frequency traders to maintain orderly markets and limit brokerages' ability to execute trades internally. It also recommended the permanent adoption of circuit breakers to temporarily halt trading in an individual security if price or volume movements caused concern. Since the US flash crash there have been a number of incidents that have renewed concerns about the safety of markets in at a time when so much trading is automated. In October 2012 almost $60bn was temporarily wiped from the stock market value of India's biggest companies, listed on the National Stock Exchange in Mumbai. The NSE blamed human error rather than a computer algorithm for the plunge which saw the index drop 15.6 per cent in minutes.