Flash Crash

Last Friday the SEC released the much anticipated report on the "Flash Crash" that occurred 6-MAY-2010 when the Dow sold off 700 points in a matter of minutes then recouped much of the losses almost as quickly to close down 347 for the day. The report found that a single market sell order of 75,000 SPX e-Mini futures contracts with a notional value of $4.1bil caused the sell off. To put that in perspective, 1 e-mini contract is equal to 500 SPY shares. That's the equivalent of sending 37,500,000 SPY to sell at the mkt with absolutely no regard to price. One can't blame the market for treating a mkt order like a mkt order. That's about 1/6th of the avg daily volume for the SPY. Although not officially named in the report, it has been revealed that a trader at the firm Waddell & Reed Financial in Kansas was responsible for the order. That's not exactly "adding alpha" to performance, which is the end goal of every trader.