Regulators have escalated their investigations of last year's May 6 Flash Crash by sending subpoenas to firms that do high-frequency trading("HFT").  On that date, the DJIA plummeted 700 points in minutes;  a joint report issued by the SEC and the CFTC attributed some of that activity to rapid-fire trading by high-frequency traders. 

With the subpoenas - some of which have been sent since the start of the summer - regulators are examining specific behaviors and firms, and seeing if and how they contributed to the flash crash, either by accident or not.  In some cases, they're looking to if any firms engage in "quote stuffing" strategies, where huge volumes of buy/sell orders are created before suddenly being cancelled.  Such a practice is intended to mislead other market participants.

In another scenario, the SEC and CFTC reported that, following a mutual fund firm's sale of a large number of futures, HFT's quickly bought and resold the contracts among themselves, which pumped up trading volume and intensified the selloff.

Regulators also are looking into high-frequency traders' computer programs, their risk controls and relationships with other firms.  Regulators are considering tighter controls in the way these firms operate - placing "rigorous standards" on traders using algorithms in order to increase market confidence and reduce volatility.  [WSJournal, 8/8/11]