The recent release of the long-awaited government report on the May 6 “flash crash” highlighted one specific trade as the catalyst for a series of chain reactions, accelerated by computer algorithms, that whipsawed the market. While the report goes a long way toward explaining the events of that afternoon, it doesn’t begin to address the systemic weaknesses of the market, highlighted by the nearly 600-point drop in the Dow Jones industrial average in a matter of minutes — and the Dow’s even faster recovery.
To an observer of global security risk, the flash crash looked like a horrific new way to cause economic, political and social damage. Although the crash played out in the U.S., the systems that underpinned it are being used globally and are currently seeing their greatest growth in Asia. The rise in the use of high-speed technology and reactive algorithms to conduct a variety of ....