An investigation carried out by the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission shed light on the so-called flash crash, which saw the Dow Jones Industrial Average plunge 1,000 points on May 6.
The report, which was released on Friday, said the selling spree was triggered by an automated trade of e-mini S&P 500 contracts on the Chicago Mercantile Exchange worth over US$4 billion by a mutual fund located around Kansas City, which was later identified as Waddell & Reed Financial.
The massive sale led to a sharp drop in activities in the markets, which were under pressure from the European debt crisis that was at its peak when the flash crash happened.
Datafeed vendor Nanex has previously stated that the crash has likely been caused by quote stuffing, a market tactic of placing a massive amount of buy and sell orders before quickly cancelling them, which is practiced by high-frequency trading firms to confuse their peers.
However this theory was refused by the findings of SEC’s investigation, which also took the blame off CME Group, which owns the Chicago Mercantile Exchange.
British Prime Minister David Cameron has established a new advisory panel dubbed the Business Advisory Council or the Star Chamber, which will provide the government with advice on critical business and economic issues facing the UK.
Some of the country’s leading business figures have been invited to partake in the panel.
The list includes Chief Executive of retailer John Lewis Andy Street, Chief Executive of owned of British Gas Centrica (LON:CNA) Sam Laidlaw, Chief Executive of pharmaceutical company GlaxoSmithKline (LON:GSK) Andrew Witty, Chief Executive of beverage group Diageo (LON:DGE) Paul Walsh, Chief Executive of retail Sainsbury (LON:SBRY) Justin King, Google (NYSE:GOOG) CEO Eric Schmidt, Chairman of defence contractor BAE Systems (LON:BA) Dick Oliver, Chief Executive of private equity firm 3i (LON:III) Michael Queen and BT (LON:BT.A) and easyJet (LON:EZJ) chairman Michael Rake.
Cameron will chair the new panel, whose meetings will also be attended by Chancellor George Osborne, Business Secretary Vince Cable and Deputy PM Nick Clegg.
Cameron stated that the new advisory council will help the government drive down the deficit and transform the economy.