A preliminary report by the US Securities and Exchange Commission and the Commodity Futures Trading Commission into the ‘flash crash’ market turmoil of May 6 has narrowed the possible causes to six “working hypotheses” – including the influence of E-Mini S&P 500 Index Futures trading at CME Group.
The first possible cause highlighted in the report, issued yesterday (May 18), is a possible link between the “precipitous decline” in the prices of stock index products – in particular the E-Mini S&P Index 500 Futures and index-tracking exchange-traded funds – and simultaneous and subsequent waves of selling in individual securities. The regulators said activity in one market may have led the others.
On the afternoon of May 6 in the US, the Dow Jones Industrial Average dropped nearly 1,000 points in minutes before recovering its losses.
The agencies’ investigation continues to focus on events between 2pm and 3pm. Some...