I. Causes ~ Negative news + quote saturation + large (coordinated?) instantaneous sale leads to delayed price data.

Negative News

The Greek Parliament's approval of austerity measures to avert debt default, triggered riots in Athens, which led to speculation and fear that it would ignite a string of defaults across Europe and the rest of the world. The riots in Athens aired live on CNBC at the start of our summary chart.  The scaling to the left of the link indicates the elapsed time shown in the video that matches the time in our chart: an elapsed time of 4:50 in the video lines up with 14:44 on our chart (the label 3m indicates the 3 minute elapsed time block).

Sale of eMini Futures and ETFs (see items 2 and 3 on main chart and Inset)

It appears that the event that sparked the rapid sell off at 14:42:44:075 was an immediate sale of approximately $125 million worth of June 2010 CME eMini futures contracts followed 25ms later by the immediate sale of over $100 million worth of the top ETF's such as SPY, DIA, QQQQ, IVV, IWM, SDS, XLE, and EEM. Both the eMini and ETF sales were sudden and executed at prevailing bid prices. The orders appeared to hit the bids.

Quote Saturation (see item 1 on chart)

Approximately 400ms before the eMini sale, the quote traffic rate for all NYSE, NYSE Arca, and Nasdaq stocks surged to saturation levels within 75ms. This is a new and surprising discovery. Previously, when we looked at time frames below 1 second, we thought the increase in quote traffic coincided with the heavy sales, but we now know that the surge in quotes preceded the trades by about 400ms. The discovery is surprising, because nearly all the trades in the eMini and ETFs occurred at prevailing bid prices (a liquidity removing event).

While searching previous days for similarities to the time period at the start of the May 6th drop, we found a very close match starting at 11:27:46.100 on April 28, 2010 -- just a week and a day before May 6th. We observed it had the same pattern -- high, saturating quote traffic, then approximately 500ms later a sudden burst of trades on the eMini and the top ETF's at the prevailing bid prices, leading to a delay in the NYSE quote and a sudden collapse in prices. The drop only lasted a minute, but the parallels between the start of the drop and the one on May 6th are many. Details on April 28, 2010

The quote traffic surged again during the ETF sell event and remained at saturation levels for nearly 500ms. Additional selling waves began seconds later sending quote traffic rates back to saturation levels. This tidal wave of data caused delays in many feed processing systems and networks. We discovered two notable delays: the NYSE network that feeds into CQS (the "NYSE-CQS Delay"), and the calculation and dissemination of the Dow Jones Indexes (DOW Delay).

NYSE-CQS Delay

The delay of NYSE's quote to the CQS system has been covered extensively in our original and subsequent reports. However, there is one new piece of information which shows that some NYSE stocks were delayed more (24 seconds) than others (5 seconds). We found that stocks beginning with the letters A through M (except for I and J) were delayed up to 24 seconds, while stocks beginning with I, J, and N through Z were delayed up to approximately 5 seconds.

DOW Delay

There were two separate delays in the Dow Jones Indexes (the Dow Industrial Average, symbol DJI, is shown in the main chart). The first delay arises from the delay in the input data (NYSE-CQS delay) and the methodology used by Dow Jones in computing DJI - they only use prices of trades from the NYSE for NYSE component stocks.

A second and larger delay appears to originate within the feed processors that compute the index values. To find the second delay, we calculated DJI using the same methodology as Dow Jones and compared the result to the value disseminated in the feed. Our prices during the periods prior to and shortly after the crash matched the prices disseminated by Dow Jones; however, during the crash, we noticed significant delays. We confirmed the prices of DJI in the feed matched or were ahead of other sources.

Financial news programs primarily used the Dow Jones Index to convey to their audience the state of the market during the Flash Crash.