The crash that lasted 36 minutes

On 6 May 2010, the New York session is tense. The Greek debt crisis is weighing on markets and indices have been sliding since the morning. Nothing unusual for a nervous day.

Then, shortly after 2:30 p.m., everything speeds up.

Twenty minutes of free fall

In roughly twenty minutes, the Dow Jones drops nearly a thousand points, about 9%. At the time, it is the largest intraday point drop ever recorded. Close to a trillion dollars of market value evaporates.

Some stock prices stop making sense. Shares of Accenture briefly trade at one cent. Others, like Sotheby's, print at one hundred thousand dollars. These aren't display glitches: real trades take place at those prices.

Then the rebound

Almost as fast as it fell, the market climbs back. Less than half an hour after the low, most of the drop has been erased. Exchanges later cancel thousands of trades executed at clearly erroneous prices.

What happened?

There was no attack, no bankruptcy, no announcement. The joint SEC–CFTC report, published in September 2010, describes a mechanical chain reaction:

1. a fund manager launches a huge sell order in S&P 500 futures, handed to an algorithm set to sell according to volume, with no regard for price or time;
2. high-frequency trading algorithms buy those contracts, then pass them back and forth at high speed, like a hot potato;
3. faced with the turmoil, many market makers step away. Liquidity disappears. Sell orders find only absurd bids, sometimes at a cent.

In 2015, a British trader operating from his bedroom was also charged with manipulating the futures market that day by placing and cancelling fake orders.

What changed

US regulators introduced circuit breakers for individual stocks, which pause trading after a violent move, and later a system of price bands. The 2010 flash crash remains the reference for what an automated market can do in a few minutes.

The lesson for traders

That day, it wasn't investors who panicked. It was the machines.

For a retail trader, two practical takeaways:

• a stop order is not a guaranteed price. In a liquidity gap, it fills at the next available price, which can be far away;
• liquidity is not a constant. It can vanish in seconds, precisely when you need it most.■