Derivatives To Blame For August 24th Crash, Says KCG

KCG knows what caused the Aug 24th crash and spoiler alert, they do not think it was HFT...

The much-discussed August 24 market sell-off, considered by some a flash crash, impacted derivatives much more than cash equities, analysis from Knight Capital Group determines, as stop loss orders exacerbated the situation when S&P 500 futures opened limit down.

Lack of liquidity and sell orders dominating the market book led to swift downward pressure on derivatives markets

The October 8 report observes that a lack of liquidity in S&P 500 futures prevented market makers from hedging their S&P 500 ETF positions, the report by Phil Mackintosh, Ka Wo Chen and Rachel...