How the 'Flash Crash' Echoed Black Monday
May 6 Selloff Had Parallels to 1987; Electronic Trading Magnified Selling Pressure This Time
Scott Patterson
WSJ
Soon after the Black Monday crash of 1987, exchanges and regulators scrambled to enact new rules to prevent a repeat of the biggest stock market shock in 50 years. Even then, they worried they hadn't done enough.
"I simply cannot give you assurances that we have fixed the system," the chairman of the Securities and Exchange Commission at the time, David Ruder, told the Senate Agriculture Committee in early 1988.
After two decades of rule-changing and technological advancements, those comments seem haunting, especially as investigators of May 6's "flash crash" stumble upon echoes of the Black Monday meltdown.
Technological innovation has been widely touted as having made the market more efficient—and more resilient. Instead, the May 6 drop—while much smaller than the 1987 crash—showed that technology mainly served to speed up trading and magnify the market moves.
(Original here.)
Scott Patterson
WSJ
Soon after the Black Monday crash of 1987, exchanges and regulators scrambled to enact new rules to prevent a repeat of the biggest stock market shock in 50 years. Even then, they worried they hadn't done enough.
"I simply cannot give you assurances that we have fixed the system," the chairman of the Securities and Exchange Commission at the time, David Ruder, told the Senate Agriculture Committee in early 1988.
After two decades of rule-changing and technological advancements, those comments seem haunting, especially as investigators of May 6's "flash crash" stumble upon echoes of the Black Monday meltdown.
Technological innovation has been widely touted as having made the market more efficient—and more resilient. Instead, the May 6 drop—while much smaller than the 1987 crash—showed that technology mainly served to speed up trading and magnify the market moves.
(Original here.)
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