This Is the Real Reason Why Flash Crashes Keep Spooking Investors
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 Amazon.com, 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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