The Flash Crash of May 6, 2010 was the biggest one-day market decline in history. It saw the Dow Jones Industrial Average plunge by about 1,000 points—9 percent of its total value—only to recover these losses within minutes. A forensic investigation of this financial event conducted by the data analyst Nanex revealed that, in contrast to claims by US authorities, which put the blame on human trading, it was in fact trade orders executed automatically by algorithms that caused the crash. Nanex noticed evidence of market activity at fractions of milliseconds by analyzing the Flash Crash at a time resolution far quicker than conventional data records, which usually show one-minute trading intervals. Computer-based high-frequency trading is beyond the capacity of human experience or action. In order to support their claim, Nanex used otherwise secret trading data provided by Waddell & Reed, the mutual fund blamed for the crash. Here the traditional role of the expert witness is replaced by a collaboration between the forensic analyst and the renegade company, which joined forces to provide information in contravention of the industry’s unwritten law of secrecy.
Countering Capitulation engages with the inquiries following the Flash Crash of May 6, 2010, an event that went down as the biggest one-day market decline in history. Focusing on a remarkable forensic analysis that not only contradicted the official findings of the regulatory authorities but also shed light on the impact of high frequency trading, Nestler argues that in the current legal framework, evidence of financial market events can only be produced by having two individuals share the role of expert witness: the forensic analyst joined by a renegade whistleblower. The video concludes with a call for renegade solidarity between the forensic analyst, the whistleblower, and the general public as the basis for an informed political debate on the effects of algorithmic trading, not just on financial markets but on society at large.