“There are a whole other group of folks who play this game,” Mr. Tabb said. “They put low limit orders into the market for this exact purpose — for when the markets go into free fall.”
Unfortunately for those investors, the exchanges have rules in place to cancel or rescind any trades that are associated with erroneous or unusual trading activity.
“If there is an order that gets printed and it is so far away from the market that it was clearly wrong, the exchanges have the right to break it and, in fact, they do it fairly often,” Mr. Tabb said. “It just doesn’t happen with this magnitude.”
On Friday, the Nasdaq market said it would cancel all trades that had occurred in the 20-minute period between 2:40 p.m. and 3 p.m. on Thursday that were 60 percent higher or lower than the last trade at 2:40. “This decision,” the exchange noted on its Web site, “cannot be appealed.”