23. The Real Culprits

On the day of the Flash Crash, the Chicago Mercantile Exchange’s (CME’s) computers spotted what was occurring and paused trading in the E-Mini market for 5 seconds. Because of that brief halt, the E-Mini market recovered immediately. The real meltdown was yet to come—in the equities markets. The ship that the Securities and Exchange Commission (SEC) had built had splintered the minute it encountered a wind gust. Regulators had driven a spike through the pocketbooks of the old-line specialists and the market makers who had once kept trading orderly, forcing most of them out of business. The many had been punished for the sins of a few.

The regulators had meant well. They had believed that computers would be more efficient, ...

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