An overreliance on computer systems and high-frequency trading were the primary drivers that contributed to the extreme market volatility on May 6, 2010, a BlackRock survey of advisors finds. Also known as the “Flash Crash,” secondary contributors cited by advisors included the use of stop-loss orders, the support of market makers and questions with exchange routing rules.
Commissioned by the iShares Exchange Traded Funds business and conducted by Market Strategies International, the survey also indicated that most advisors’ accounts were not impacted by the events.
Advisors are encouraged with the initial recommendations by the SEC to make the needed changes to market structure. The single-stock circuit breaker rule proposed by the SEC is one of the primary solutions advisors endorse to address the causes of the May 6th market decline. Advisors surveyed also favor clearer inter-market routing guidelines to rectify market structure problems and feel strongly towards placing trading audits and expanding the role of the lead market maker.