Flash Crashes are not a phenomenon caused by algorithms. The SEC/CFTC report on the 2010 Flash Crash describes how it happened. Quote: One key lesson is that

Flash Crashes are not a phenomenon caused by algorithms. The SEC/CFTC report on the 2010 Flash Crash describes how it happened. Quote: One key lesson is that under stressed market conditions, the automated execution of a large sell order can trigger extreme price movements, especially if the automated execution algorithm does not take prices into account. Moreover, the interaction between automated execution programs and algorithmic trading strategies can quickly erode liquidity and result in disorderly markets. http://www.sec.gov/news/studies/2010/marketevents-report.pdf http://www.sec.gov/news/studies/2010/marketevents-report.pdf