The catalyst for the "flash crash" on 6 May was a single trade by an institutional investor who sold $4.1bn of index futures, according to a new report released by US regulators.
The report, issued by the Securities and Exchange Commission in conjunction with the Commodities Futures Trading Commission, says the trade was initiated by "a large fundamental trader," who used an automated program to sell 75,000 E-Mini S&P 500 futures as a hedge to an existing equity position. The report says the sell program was executed by the investor "extremely rapidly," taking only 20 minutes. The rapid trade propagated further sales by other automated programs. This was combined with selling pressure from high frequency traders, which saw the price of the E-Mini driven down b...
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