Flash Crash

In what is evolving into a series of episodes, the NYSE experienced yet another flash crash yesterday. This incident involved SPY, an ETF that tracks the S&P 500 Index. About a half-billion dollars in trades were voided as a result of yesterday's flash crash.

That represents a big "oops," even in devalued U.S. dollars. All a non-professional in the world of equity trading can say is something is very wrong with a market structure that collapses as often as one sneezes.

The recent SEC investigation of a recent flash crash cited Waddell & Reed, a relatively obscure Midwestern firm, for causing an entire sophisticated market to seize up. The SEC's assertion was met with considerable skepticism. It is unlikely that the same firm caused yesterday's flash crash; a "system upgrade" at NYSE Arca has been cited as the culprit for this episode. Buyers for this story are not exactly lining up. The SEC, NYSE, and other market players have a lot of explaining to do.