One sale of futures contracts by a mutual fund (worth 4.1 billion) started the series of events that led to the flash crash on May 6th. The crash erased more than 600 points from the Dow Jones industrial average. This is based on a report by the Securities and Exchange Commission and the Commodity Futures Trading Commission.
The firm Waddell & Reed Financial out of Kansas started a program to sell 75,000 E-Mini Standard and Poor's 500 future contracts. Because a sale this large was completed in 20 minutes in stead of the normal 5-6 hours, the market reaction was drastic.
Although this trade caused the Dow to drop 990 points or 9.1% , the average quickly rebounded, rising 543 points in about 90 seconds.
Although the Dow recovered, the events on May 6th could have easily contributed to the current distrust people are feeling. In May alone, $19 billion was taken out by investors from domestic stock market funds.
I think it is interesting that $19 million was taken out by investors due to 20 minute sale that would recover on the DOW in 90 seconds. It just goes to show how the American people are so easily affected by the movement of the stock market.
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