The main parts to this puzzle are ECNs, hedge fund algo trading, and scared and bruised investors. ECNs make transmitting and execution of trade orders quick a

The main parts to this puzzle are ECNs, hedge fund algo trading, and scared and bruised investors. ECNs make transmitting and execution of trade orders quick and easy. Hedge funds and proprietary trading desks (basically hedge fund-like operations within investment banks) within banks often run "black box" models that have rules built into them which determine when to send a buy or sell order down to the exchanges (some larger funds even have their computers / algos co-located at exchanges to bring down latency). All these different firms have different models, but they surprisingly have a lot in common, especially when things are going south quickly. When a 6 stdev event (or whatever the hell today was) occurs, all those models spit out sell orders, which push prices down more, which results in more sell orders, etc. etc. and the race is on until we get to zero OR until someone with a stomach for risk comes in and starts to buy (or some other algos come in and pick up on "value stock" opportunities). Given the last year or two we've been through, there aren't too many of them around so the effect is magnified even more.