Was the May 6 Flash Crash really all that unique? Or have we had some mini-Flash Crashes that affected single stocks?

Consider the stock movement of Diebold on June 2. Before 12:22 p.m., the stock traded at about $28 per share and within a range of 80 cents. In the next minute, 399,000 shares traded and Diebold's stock price plunged 35 percent to $18. Over the next 18 minutes, the stock recovered. This was in response perhaps to news of an SEC settlement.

The Washington Post stock lurched in the other direction last week. Three erroneous trades went through NYSE Arca--two at $919.18 per share, and another at $929.18. The company's shares had been trading at roughly $455 before the three trades. The stock triggered the new single-stock circuit breaker, the first to ever do so.

So what's going on? Sen. Ted Kaufman thinks all of this is worth looking into. "Regardless of what caused Diebold's 'bungee jump' or the May 6 market meltdown, we should all agree that such unusual market activity strikes at the very heart of our market's credibility."

We certainly need a better understanding of whether algorithms are behind either situation. Can they really "overreact" to news? How easy is it to make erroneous trades? These sorts of errors have happened before. But it's unclear if they are more common in the algorithmic era. Perhaps the new consolidated audit trail will offer some insights someday.

Related Articles:
SEC looks at Flash Crash and market makers
Some algorithms being re-written after Flash Crash
Cause of Flash Crash a permanent mystery?