Algorithms Had Themselves a Treasury Flash Crash

On Monday, U.S. regulators released a long shrug of a report on the Great Treasury Flash Crash of Oct. 15, 2014, when the prices of Treasury bonds shot up between 9:33 and 9:39 a.m. and then shot right back down between 9:39 and 9:45.1436805172194 The regulators don't know what caused the flash crash.1436811380874 But they do know what stopped it. This is maybe the most emphatic causal claim in the report1436809369551:

People (algorithms) who trade Treasury futures can see all the bids and offers to buy and sell Treasury futures at prices close to the current price. During the flash crash, Treasury prices were going up because lots of people were trying to buy Treasuries and not so many people were trying to sell. But there were people (algorithms) who had placed orders to sell Treasury futures at pretty high prices, and as the price kept going up, everyone else discovered those orders. So the people (algorithms) who were frantically buying Treasury futures realized that there were other people who wanted to sell Treasury futures. Those other people never actually sold those futures -- their mere existence, glowering in the order book 10 levels away, was enough to scare off the buyers and turn them into sellers, reversing the flash crash.1436811286999