Yesterday the NYSE Arca had a limited, less sever but nonetheless worrisome version of the May 6 flash crash. In this event, the price of the S&P 500 SPDR ETF fell 10% in eight seconds near the close of trading. NYSE Arca "busted" the trades without providing an explanation for the anomaly.

In the SEC's report on the flash-crash, they blamed algorithmic trading in the S&P500 E-Mini futures contract on the Chicago Mercantile Exchange for sending the Dow down 998 points. Circuit breakers for individual securities were introduced as a remedy, but as yesterday's incident shows, they are not entirely effective. A Bloomberg article yesterday cited several more examples of flash events resulting in busted trades in individual stocks over the last few months.

What is not clear at this point is if some of the trading algorithms occasionally malfunction, if they work properly individually but have unpredictable effects when used in masse, or if there is any intentional market manipulation in play. What is clear is that until the exchanges, regulators, and trading community get a better understanding of systemic effects of algorithmic trading and build a more robust system, we remain at risk of other flash trading events.