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ETFs and the Flash Crash

For a period of approximately 15 minutes on May 6, 2010, markets appeared to behave abnormally, as many equity and ETF securities saw trades occur at prices in the range of 40 percent or more down from their most recent prior trade prices. Nothing about these corporations or the ETF fund structure containing the equity in these corporations had materially changed over that 15-minute period to warrant such excessive drops in valuation. Why did this happen, and why hadn’t it occurred before? What has been done to prevent it from occurring in the future? This chapter goes through the details of how ETFs were affected.

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