What caused the flash crash is a poor implementation of stop and market orders. Essentially, the exchanges do not natively have a concept of "market orders" --

What caused the flash crash is a poor implementation of stop and market orders. Essentially, the exchanges do not natively have a concept of "market orders" -- filling now. Instead, some brokers implement them by selling at a penny or buying at some enormous price, essentially hitting the bid or offer. Under normal circumstances this is not a problem, as the prices are reasonable. However, during periods of extreme dislocation, when traders pull out their limit orders, all that are left are stub quotes at a penny. And because those brokers used algos that would trade at a penny, those trades happened. You debug an algorithm like you debug any other piece of software :) I "debug" by using a regression against a pure python implementation, which was implemented in the most obvious and correct way. I discussed it here: http://veyronb.wordpress.com/2011/11/02/prototyping-with-python/ http://veyronb.wordpress.com/2011/11/02/prototyping-with-pyt...