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This Is the Real Reason Why Flash Crashes Keep Spooking Investors

You can blame technology for flash crashes.
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You can blame technology for flash crashes.

"They're happening more frequently," said Brad Katsuyama, CEO of IEX, a company that gained attention following Michael Lewis's book Flash Boys back in 2014. "We live in an automated world and a lot of times you'll see a stock like JPMorgan Chase (JPM) - Get JPMorgan Chase & Co. Report a couple of years ago open down 30% and then recovers immediately after."

Katsuyama also pointed to Amazon's (AMZN) - Get, Inc. Report stock, which on June 9 dropped $45 in the span of four seconds. 

"The majority of trading volume in the market is traded by automated, high speed traders who really don't know what companies do - it's just data in and data out," he said.

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Meanwhile, 2.3% of trades filters through IEX, compared to 14% for Nasdaq.

IEX won approval by the Securities and Exchange Commission in 2016 to become an exchange. 

Katsuyama's next goal is to start listing companies. 

"NYSE and Nasdaq have had a 50 year old duopoly listing stocks," he said. 

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