You Were There: The Flash Crash
May 6, 2010 — The day the plumbing exploded
Complex systems don't fail gracefully. They fail by suddenly revealing what they always were.
2:32 PM ET #
The tape screams.
E-mini S&P 500 futures contracts begin an unprecedented descent into the void. Liquidity hasn't just dried up — it's been deleted. You're staring at an order book where the bid-ask spread has widened to a canyon.
The Big Plug has been pulled.
Your terminal displays a waterfall of red as high-frequency algorithms enter a feedback loop of systemic self-destruction.
Welcome to the Flash Crash.
What I Saw #
I was just getting back from my lunch break, wondering if I was connected to a broken paper feed.
This was maybe my fourth day on the job at a trading technology company. I'd just come from working at tradingcomputers.com, where I'd spent months hearing customers kick their machines as they smoked through their 7200 RPM drives. Our Raptor customers probably had better luck, but still — I'd seen what market chaos did to people and their equipment.
But that was a slow-motion disaster spread across months. This was different.
There was a point where we all sort of collectively stood up and looked around the room.
"Uhh... is this gonna stop?"
Nobody answered. Because nobody knew.
It was hysteria for the next few minutes. Phones ringing. Screens refreshing. People just staring at numbers that didn't make sense.
And then — it was over.
Like a fire drill we weren't prepared for but had all rehearsed.
What Actually Happened #
At 2:32 PM, a mutual fund company executed an algorithm to sell $4.1 billion worth of E-mini S&P 500 futures contracts. The algorithm was set to execute based on volume, not price or time.
That's the technical explanation. Here's what it meant:
The algorithm didn't care what price it got. It just kept selling. And selling. And selling.
High-frequency trading firms — the ones who normally provide liquidity by sitting on both sides of the order book — saw the waterfall and did the rational thing: they stepped back. Why catch a falling knife?
With no one willing to buy, prices went into freefall.
The Dow Jones Industrial Average dropped nearly 1,000 points in minutes. Procter & Gamble, a blue-chip stock that your grandmother probably owns, traded at a penny. Accenture went to zero.
Zero.
Then, just as suddenly, it snapped back. By 3:07 PM, most of the losses had been erased.
Total elapsed time: about 36 minutes.
What It Revealed #
That day taught me something I've carried ever since:
Market structure is plumbing. And most people never think about plumbing until it explodes.
The Flash Crash revealed:
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Liquidity is a lie. The order book looks deep until everyone runs for the exit at once. Then you discover how thin it really was.
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Algorithms don't panic — but they don't think either. They execute instructions. When those instructions meet edge cases nobody anticipated, the results are catastrophic.
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Speed is a weapon. The HFT firms saw the crash coming microseconds before everyone else. They got out. Retail traders staring at delayed feeds? They got slaughtered.
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Circuit breakers didn't exist yet. The market had no pause button. It just kept going until the tape ran out of prices to print.
The Aftermath #
The SEC eventually implemented circuit breakers — automatic trading halts when prices move too fast. They also created the "Limit Up-Limit Down" rule to prevent stocks from trading outside certain bands.
But here's the thing: those rules exist because someone had to watch P&G trade at a penny first. Someone had to watch Accenture go to zero. Someone had to lose real money before the adults in the room decided maybe the system needed guardrails.
That's always how it works.
Why This Matters to You #
If you're day trading from your home office in 2026, you're competing against systems that can:
- See order flow before you do
- Execute trades in microseconds
- Pull liquidity the moment things get weird
You're the guy on the 2400-baud modem in 1989. You're the guy staring at a delayed feed in 2010. You're the guy who finds out what the price was after everyone else has already traded on what it is.
The Flash Crash lasted 36 minutes. In that window, fortunes were made and lost. And the people who made money? They weren't sitting at home wondering if the feed was broken.
They were the ones who broke it.
This is part of the "You Were There" series — first-hand and reconstructed accounts of market events that broke people, systems, and assumptions.
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