The 2010 Flash Crash occurred on May 6, 2010, when U.S. stock markets plunged sharply and recovered much of the loss within minutes. The Dow Jones Industrial Average temporarily fell about 1,000 points, nearly 9%, before rebounding.
The episode began amid an already tense market environment linked to the European sovereign-debt crisis. Automated trading, liquidity withdrawal, and a large sell order contributed to exceptionally rapid price movements. Some individual securities briefly traded at wildly distorted prices, including shares that appeared to fall to only a few cents.
Investigations by U.S. regulators concluded that the crash involved interactions among algorithmic trading, high-frequency trading, and a large futures transaction. The event led to new safeguards, including circuit breakers and clearer procedures for reviewing clearly erroneous trades. It is different from a conventional crash caused by a long period of fundamental economic deterioration.