Thoughts On The May 6 Stock Market Plunge

I find last Thursday's stock market plunge to be highly notable on several fronts.  The temptation is to treat the event as a "fluke" or "one off" event that is inconsequential; it is especially tempting to do so when most of the damage was quickly reversed and, as of this writing, stock indices are again climbing.
There is no official report yet about the causes and effects of Thursday's plunge.  Aside from the main question as to what caused the plunge, I think that the following questions are paramount and also deserve recognition:

• Is technology a "culprit" in the affair or is it working like it should?
• Does this stock market plunge belie the widely held (and "common sense") assumption that these stock markets are immensely "liquid"?
• What trades should be "broken" and why?
• Is the current stock market "system" one that has a great deal of inherent "integrity" - both structurally and ethically?
• Are rules and regulators "behind the (technology) curve" as widely speculated?
• Will further rules, regulations, and "trading curbs" make a similar future occurrence more or less likely?
• Will the exact cause of the plunge ever be determined?
• Can the exact cause of the plunge be determined?
• Does the plunge nullify the idea, held by some, that markets are "efficient"?

There are countless other questions that can be added to the above list.  Needless to say, I think the plunge has great significance and to summarily dismiss it, as many appear to have done, is a mistake.
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I wrote of my concerns about high-frequency trading and the stock market about four weeks prior to Thursday's plunge.

SPX at 1110.88 as this post is written