It seems conceivable that everything functioned exactly as it was designed.
As the Yen spiked, holders of much borrowed USD needed to liquidate and pay back their borrowings, and program selling snowballed across very very thin markets.
Several 'liquidity providers' including TradeBot withdrew liquidity in the plunge, perhaps leading to the 0.00 and 0.01 bids that applied to quite a few stocks.
We have a very poorly regulated system, with few safeguards for regular investors. Sure, the spreads are generally tighter than the old days of floor trading, but the secret dark markets and computer trading can be turned on and off at will, leading to the kind of thing we saw Thursday.
You seem to be under the erroneous assumption that human specialists and market makers actually caught falling knives in the past. Sure the rulebooks said they were supposed to, but rules aren't reality.
Black Monday is the classic example. Lots of phones were ringing and simply not getting picked up because they didn't want to deal with the orders. That's even worse than today. Unless you were on the right trading floors, you couldn't know what was happening and you couldn't cancel or enter new orders.
As the Yen spiked, holders of much borrowed USD needed to liquidate and pay back their borrowings, and program selling snowballed across very very thin markets.
Several 'liquidity providers' including TradeBot withdrew liquidity in the plunge, perhaps leading to the 0.00 and 0.01 bids that applied to quite a few stocks.
We have a very poorly regulated system, with few safeguards for regular investors. Sure, the spreads are generally tighter than the old days of floor trading, but the secret dark markets and computer trading can be turned on and off at will, leading to the kind of thing we saw Thursday.