May 6 Stock Market Plunge

Additional changes to prevent another "flash crash" are on the way, the U.S. Securities and Exchange Commission said Monday. Among other things, the commission may tinker with the circuit breakers it set up to automatically halt trading if a stock falls 10% in five minutes.

The May 6 "flash crash" is still somewhat of an enigma, but an advisory panel meeting on Friday to review a report into it could at least help regulators establish some new market rules to prevent similar crashes from occurring in the future, Reuters reports.

The first half of 2010 has been anything but dull for exchange-traded fund investors. ETF assets in the U.S. decreased 0.4% to $772 billion as of June 30, but that actually indicates a serious inflow of cash: Equity markets, as measured by the S&P 500, fell 8.9% during the period.

Elizabeth King, formerly of the SEC's trading and markets division, has joined Getco's team. How much progress can the SEC make in curbing high-frequency traders like Getco with former SEC leaders on Getco's payroll?

The SEC hasn't found the cause of the May 6 stock market "flash crash," but it's putting in circuit breakers to prevent a recurrence. Regulators are also talking about leveling the playing field between high-frequency traders and retail investors. Don't bet on it.

More and more evidence points to high-frequency traders, who could now account for some 50% to 70% of all trades. And some have rules against carrying open positions after the close of trading. Time for a speed limit?

Remember May 6 when the Dow plunged nearly 1,000 points in intraday trading? The tale of a so-called fat finger, where a trader keyed in billions instead of millions, wasn't what happened. Here's the real story.

A number of stock market participants believe the SEC's decision to leave exchange-traded funds out of proposed new circuit breaker rules designed to avoid a repetition of the May 6 stock market "flash crash" may do more harm than good.

The "flash crash" was a day of reckoning for investors in exchange-traded funds. ETFs didn't cause the meltdown, but they were its victims, and investors will need to adjust their strategies to avoid similar losses in the future.

Any S&P 500 stock that has a 10% swing within five minutes would get a timeout, with trading in it paused for five minutes across all domestic equity markets. That last point is key.