[10] On April 21, 2015, nearly five years after the incident, the U.S. Department of Justice laid 22 criminal counts, including fraud and market manipulation against Navinder Singh Sarao, a British Indian financial trader.

Among the charges included was the use of spoofing algorithms; just prior to the flash crash, he placed orders for thousands of E-mini S&P 500 stock index futures contracts which he planned on canceling later.

[11] Sarao began his alleged market manipulation in 2009 with commercially available trading software whose code he modified "so he could rapidly place and cancel orders automatically".

[11] Traders Magazine journalist, John Bates, argued that blaming a 36-year-old small-time trader who worked from his parents' modest stucco house in suburban west London[11] for sparking a trillion-dollar stock market crash is "a little bit like blaming lightning for starting a fire" and that the investigation was lengthened because regulators used "bicycles to try and catch Ferraris".

Furthermore, he concluded that by April 2015, traders can still manipulate and impact markets in spite of regulators and banks' new, improved monitoring of automated trade systems.

[4] In May 2014, a CFTC report concluded that high-frequency traders "did not cause the Flash Crash, but contributed to it by demanding immediacy ahead of other market participants".

They show that breakdowns in market quality (such as flash crashes) have occurred in every year they examined and that, apart from the financial crisis, such problems have declined since the introduction of Reg NMS.

[15]: 641  The Reg NMS, promulgated and described by the United States Securities and Exchange Commission, was intended to assure that investors received the best price executions for their orders by encouraging competition in the marketplace, but created attractive new opportunities for high-frequency-traders.

[25] The Wall Street Journal quoted the joint report, "'HFTs [then] began to quickly buy and then resell contracts to each other—generating a 'hot-potato' volume effect as the same positions were passed rapidly back and forth.

[25] From the SEC/CFTC report:[43] The combined selling pressure from the sell algorithm, HFTs, and other traders drove the price of the E-Mini S&P 500 down approximately 3% in just four minutes from the beginning of 2:41 p.m. through the end of 2:44 p.m. During this same time cross-market arbitrageurs who did buy the E-Mini S&P 500, simultaneously sold equivalent amounts in the equities markets, driving the price of SPY (an exchange-traded fund which represents the S&P 500 index) also down approximately 3%.

Still lacking sufficient demand from fundamental buyers or cross-market arbitrageurs, HFTs began to quickly buy and then resell contracts to each other—generating a “hot-potato” volume effect as the same positions were rapidly passed back and forth.

[45] The New York Times then noted, "Automatic computerized traders on the stock market shut down as they detected the sharp rise in buying and selling".

[27] As computerized high-frequency traders exited the stock market, the resulting lack of liquidity "caused shares of some prominent companies like Procter & Gamble and Accenture to trade down as low as a penny or as high as $100,000".

[26][27][28] The joint report continued: "At 2:45:28 p.m., trading on the E-Mini was paused for five seconds when the Chicago Mercantile Exchange ('CME') Stop Logic Functionality was triggered in order to prevent a cascade of further price declines.

[43] A few hours after the release of the 104-page SEC/CFTC 2010 report, a number of critics stated that blaming a single order (from Waddell & Reed) for triggering the event was disingenuous.

They have photographic evidence to prove it—the highest-tech background that The New York Times (on September 21, 2010) could find for a photo of Gregg Berman, the SEC’s point man on the flash, was a corner with five PCs, a Bloomberg, a printer, a fax, and three TVs on the wall with several large clocks.

[52] The authors of this 2011 paper apply widely accepted market microstructure models to understand the behavior of prices in the minutes and hours prior to the crash.

For that purpose, they developed the Volume-Synchronized Probability of Informed Trading (VPIN) Flow Toxicity metric, which delivered a real-time estimate of the conditions under which liquidity is being provided.

As they withdraw, liquidity disappears, which increases even more the concentration of toxic flow in the overall volume, which triggers a feedback mechanism that forces even more market makers out.

However, independent studies published in 2013 strongly disputed the claim that one hour before its collapse in 2010, the stock market registered the highest reading of "toxic order imbalance" in previous history.

According to Bloomberg, the VPIN metric is the subject of a pending patent application filed by the paper's three authors, Maureen O'Hara and David Easley of Cornell University, and Marcos Lopez de Prado, of Tudor Investment Corporation.

Like the SEC/CFTC report described earlier, the authors call this cascade of selling "hot potato trading",[53] as high-frequency firms rapidly acquired and then liquidated positions among themselves at steadily declining prices.

The authors conclude: Based on our analysis, we believe that High Frequency Traders exhibit trading patterns inconsistent with the traditional definition of market making.

Consequently, we believe, that irrespective of technology, markets can become fragile when imbalances arise as a result of large traders seeking to buy or sell quantities larger than intermediaries are willing to temporarily hold, and simultaneously long-term suppliers of liquidity are not forthcoming even if significant price concessions are offered.Recent research on dynamical complex networks published in Nature Physics (2013) suggests that the 2010 Flash Crash may be an example of the "avoided transition" phenomenon in network systems with critical behavior.

The NASDAQ released their timeline of the anomalies during U.S. Congressional House Subcommittee on Capital Markets and Government-Sponsored Enterprises[83] hearings on the flash crash.

In this respect, automated trading systems will follow their coded logic regardless of outcome, while human involvement likely would have prevented these orders from executing at absurd prices.

As noted below, we are reviewing the practice of displaying stub quotes that are never intended to be executed.Officials announced that new trading curbs, also known as circuit breakers, would be tested during a six-month trial period ending on December 10, 2010.

[90] In a 2011 article that appeared on the Wall Street Journal on the eve of the anniversary of the 2010 "flash crash", it was reported that high-frequency traders were then less active in the stock market.

Sharp movements in stock prices, which were frequent during the period from 2008 to the first half of 2010, were in a decline in the Chicago Board Options Exchange volatility index, the VIX, which fell to its lowest level in April 2011 since July 2007.

[94] By April 2015, despite support for the CAT from SEC Chair Mary Jo White and members of Congress, work to finish the project continued to face delays.