High Frequency Trading, Accident Investigation, and the 6 May 2010 Stock Market Flash Crash

November 2014
Topics: Economics, Complex Systems Engineering, Modeling and Simulation
Gary J. Vecellio, The MITRE Corporation
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This paper describes a novel application of a system-based accident investigation method to the understanding of a complex financial system incident. STAMP (Systems Theoretic Accident Models and Processes) is used to model aspects of the flash crash of May 6th 2010. STAMP was applied to the E-Mini S&P 500 (E-Mini), a stock market index futures contract traded on the Chicago Mercantile Exchange's (CME) Globex electronic trading platform. The application of the STAMP method made it clear the E-Mini market lacked the level of control necessary for the market to be defined as a controlled process.

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