"What's disturbing is the depth of the market during the event -- or rather, the utter lack thereof.
You can see the size map essentially disappear as the market's depth goes "cold."
One of the classical arguments raised by proponents of high-frequency trading and computer-based trading in general is that it "adds system liquidity." But if that was all it did there shouldn't be any impact on the market's price if that liquidity disappears.
That is, if HFT and computer-based trading merely add liquidity then there should be no directional bias in their decisions nor in the outcomes when it goes away.
But there are -- repeatedly. We don't see liquidity evaporate during "flash skyrocket shots" in the general sense. Instead, we see it happen during sharp downward moves.
The original purpose of the specialist system on the NYSE was to interject a human being in the trading environment who had a duty to buy when there were no other orders to do so, and to sell when there were only buy orders.
In exchange for the risk of getting caught glad-handed during severe events the specialist was given the privilege of making a spread the rest of the time.
Now we have computers that the operators claim provide the same function as the old specialists. But in fact they do not, because there is no duty associated with their actions.
We allow them to effectively front-run through physical location and latency advantages (that is, they see quotes and price before anyone else and thus can react faster than anyone else) and as a result during normal circumstances they effectively get to skim just as the specialists did. But they have no duty to remain online and provide that liquidity during severe market events as the specialist did and does."