The Microstructure of the “Flash Crash”: Flow Toxicity, Liquidity Crashes, and the Probability of Informed Trading

@article{Easley2011TheMO,
  title={The Microstructure of the “Flash Crash”: Flow Toxicity, Liquidity Crashes, and the Probability of Informed Trading},
  author={David A. Easley and Marcos M. López de Prado and Maureen O'Hara},
  journal={The Journal of Portfolio Management},
  year={2011},
  volume={37},
  pages={118 - 128}
}
The “flash crash” of May 6, 2010, was the second-largest point swing (1,010.14 points) and the biggest one-day point decline (998.5 points) in the history of the Dow Jones Industrial Average. For a few minutes, $1 trillion in market value vanished. In this article, the authors argue that the flash crash was the result of the new dynamics at play in the current market structure. They highlight the role played by order toxicity in affecting liquidity provision, and they show that a measure of… Expand
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