There are thousands of flash crashes a year in single stocks on the market, usually explained by algorithmic trading or mistakes but could also just be blind panic as the rational market adjusts to news, rumour and FUD. Usually these stocks are suspended and any problem trades reset.
Whether these are exacerbated by hft is hard to tell, but I can't see how it would help damp volatility. Probably they have more to do with momentum investors and algorithmic trading, though they can easily happen with only human trade too, just at a slower pace. Would be interesting to see stats on volatility going back decades, but it's probably quite a complex subject for a layperson.
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> The "flash crash" can be seen as a simple illustration of this but so could be the greater volatility we have seen in the last few years.
Which "flash crash"? The one about a year ago or the one in the mid-60s?
There are thousands of flash crashes a year in single stocks on the market, usually explained by algorithmic trading or mistakes but could also just be blind panic as the rational market adjusts to news, rumour and FUD. Usually these stocks are suspended and any problem trades reset.
Whether these are exacerbated by hft is hard to tell, but I can't see how it would help damp volatility. Probably they have more to do with momentum investors and algorithmic trading, though they can easily happen with only human trade too, just at a slower pace. Would be interesting to see stats on volatility going back decades, but it's probably quite a complex subject for a layperson.
Here are some examples: http://www.usatoday.com/money/markets/2011-05-16-mini-flash-...