The brief 2010 U.S. market plunge and rapid rebound is known as the Flash Crash.
On May 6, 2010, major U.S. stock indexes dropped sharply within minutes before recovering much of the loss. The Dow Jones Industrial Average briefly fell by nearly 1,000 points, then rebounded. Individual securities also experienced extreme and temporary price movements, including trades at implausibly low or high prices.
Investigations found that automated and high-frequency trading interacted with a large sell order and already-fragile market conditions. The exact sequence involved complex relationships among algorithms, liquidity providers, futures markets, and stock markets. A British trader, Navinder Singh Sarao, was later charged and convicted in connection with spoofing-related activity, although the event resulted from more than one factor.
The Flash Crash differs from a traditional crash because much of the decline occurred and reversed within a single trading session. Regulators introduced measures such as single-stock circuit breakers and market-wide safeguards to reduce the chance that similar feedback loops would spread unchecked.