Financial advisers in the US believe the "flash crash" on May 6 was caused by market structure issues, according to a survey commissioned by iShares.
Advisers cite an over reliance on computer systems and high-frequency trading as the main drivers that fuelled the sharpest single-day point decline in Dow Jones history, which was followed by an immediate rebound.
The survey, conducted by Market Strategies International, reveals advisers believe secondary drivers included the use of stop-loss orders, the support of market makers and questions concerning exchange routing rules.
Despite the extreme volatility, the survey shows most advisers' accounts were not impacted by the "flash crash." A quarter of advisers claim the most common account impact was a stop-loss order triggered by the event, at a significantly reduced value.
Advisers generally welcome the recommendations by the Securities and Exchange Commission to change the market structure, including the proposed single-stock circuit breaker rule.
The survey also shows advisers prefer clearer inter-market routing guidelines to address market structure issues, and feel strongly towards expanding the role of the lead market maker.
Market Strategies International executive vice president Rob Stone says advisers' market sentiment leans towards continued or increased market volatility, stating they will use ETFs most often in uncertain markets.
However, those surveyed anticipate that an event similar to May 6 will occur again, despite any measures put in place to prevent it. Advisers still identified ETFs as the best investment vehicles to navigate a volatile market environment, followed by bonds and mutual funds.
BlackRock head of US iShares products Noel Archard says: "We continue to work with regulators by providing insights and observations into ways to further improve the existing market structure so that an event similar to May 6 can be prevented."
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