The 2010 U.S. market plunge linked partly to high-frequency trading was called the Flash Crash.
On May 6, 2010, major U.S. stock indexes dropped extremely rapidly, with the Dow Jones Industrial Average losing nearly 1,000 points before recovering much of the fall. The episode lasted only a short time, but it exposed how automated trading could amplify sudden order imbalances.
A joint investigation by U.S. regulators concluded that a large automated order in E-mini S&P 500 futures helped create conditions for the plunge. High-frequency traders, liquidity withdrawal, and rapid cross-market activity contributed to the disorder. The precise mechanics were complex rather than a single simple computer error.
Many individual securities briefly traded at bizarre prices, and numerous transactions were later canceled. The event led to reforms including stronger monitoring and mechanisms intended to pause trading during extreme volatility.