Which company’s trading algorithm was blamed for a major role in the 2010 Flash Crash?

Waddell & Reed was the investment firm whose trading algorithm was blamed for a major role in the 2010 Flash Crash.

On May 6, 2010, U.S. stock markets experienced a sudden and extraordinary plunge followed by a rapid partial recovery. The Dow Jones Industrial Average briefly lost nearly 1,000 points, while many individual securities traded at prices far outside their normal ranges.

A joint investigation by U.S. regulators concluded that a large automated sell order initiated by Waddell & Reed interacted with high-frequency trading and market conditions. The report described how selling pressure circulated through interconnected markets and overwhelmed available liquidity. The event was not attributed to one simple mechanical mistake alone.

The Flash Crash led to reforms including single-stock circuit breakers, market-wide safeguards, and changes to how clearly erroneous trades were handled. It is often confused with the 2010 European sovereign-debt crisis, but the U.S. event was a separate intraday market disruption.