Dissecting May 6th's flash crash mystery.Like an apple tree among the trees of the woods,
So is my beloved among the sons.
—Song of Solomon
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Apparently, something called "quote stuffing" is thought to have played a part in the "flash crash" of May 6, 2010. However according to Eric Hunsander, founder of Nanex, the "noise" quote stuffing created — although thought a contributing factor to the market's dislocation — needs to be separated, so a better understanding of what actually triggered the so called "flash crash" might be established...
You almost get the sense quote stuffing was used to mask the real nature of what was behind the evaporation of bids on a handful of widely held U.S. stocks. There was some other operation being executed whose source and import effectively were being disguised. My view has been, and remains, the so-called "fat finger" initially cited as being responsible for May 6th's flash crash had something to do with introduction of the Cantwell-McCain amendment reinstating Glass-Steagall to the FinReg bill being debated in the U.S. Senate at the time. The "flash crash" was a statement — a threat — warning legislators against any thought of restoring the financial integrity of the U.S. banking system.
A Glass-Steagall reorganization of the banking system would threaten to choke off a major source of capital (i.e. deposits) glorified gamblers believe better leveraged in a securities Ponzi scheme that in truth can be furthered no more, regardless of how much capital it has access to. For all practical purposes confidence is shot. May 6th's flash crash was but icing on the cake.
—Tom Chechatka
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