The extreme one-day market plunge caused by automated trading on May 6, 2010, was the flash crash.
During the afternoon of May 6, major U.S. equity indexes and many individual securities fell extraordinarily quickly before recovering much of the loss. The Dow Jones Industrial Average dropped about 1,000 points, or roughly 9 percent, within minutes, although the full-day decline was smaller.
Investigations found that a large sell order in the E-mini S&P 500 futures market helped interact with high-frequency trading and shrinking market liquidity. Automated systems intensified the temporary imbalance between sellers and buyers. Regulators later introduced safeguards, including circuit breakers and rules addressing clearly erroneous trades.
The flash crash was not a conventional multi-year bear market or a lasting economic depression. Its defining features were speed, automation, fragmented markets, and a partial rebound on the same day. The event helped focus public attention on algorithmic trading and the risks of markets becoming temporarily illiquid.