On May sixth two thousand ten, the leading measure of American stocks briefly fell nearly one thousand points, or about nine percent. The Dow Jones Industrial Average then recovered much of those losses by the end of trading that day.

The Securities and Exchange Commission ordered steps to prevent future “flash crashes” like that one. Joel Hasbrouck of New York University says those steps are working.

JOEL HASBROUCK: “They’re called circuit-breakers, and basically what they mean is that when a stock has moved by a large amount in a short period of time, there’s a trading halt.”

Joe Saluzzi of Themis Trading says the main problem with high-speed trading is an unbalanced market.

JOE SALUZZI: “The stock market used to be a predictor of the future economy. Now I think the stock market is a backwards predictor. It doesn’t tell you, it’s not forecasting. It’s forecasting the next microsecond move.”

But Joel Hasbrouck says high-speed trading can, in fact, reduce sharp rises or drops in stock prices.

JOEL HASBROUCK: “In normal circumstances, high-frequency traders act as market-makers. That means, they stand by passively waiting to buy or sell from whoever comes into the market needing to trade. In that capacity, they actually help stabilize the market.”

High-frequency traders use computers to follow stock price movements, buy shares and then sell them to another buyer, all within seconds. This is the opposite of long-term investing. American and European officials are considering ways to limit high-frequency trading. They say this may help protect against extreme market volatility in the future.