Flash Crash

Flash crash is a rapid, deep, and usually transient collapse in asset prices driven by algorithmic interaction rather than fundamental deterioration. The prototypical event occurred on May 6, 2010, when the Dow Jones Industrial Average lost approximately 9% of its value in minutes before recovering most of the loss within the hour. Flash crashes are miniature systemic risk events operating at machine timescales: dense coupling between algorithmic agents, positive feedback from herding and momentum strategies, and operation near contagion threshold produce cascades that complete before human institutions can intervene. They demonstrate that the same structural vulnerabilities that produced the 2008 crisis repeat at accelerated speeds in algorithmic domains.

Flash crashes are not anomalies. They are the normal operating mode of systemic risk at machine tempo.