It sounds like "Wall Street" meets "The X-Files."

The stock market mysteriously plunges 600 points - and then, more mysteriously, recovers within minutes. Over the next few weeks, analysts at Nanex, an obscure data company in the suburbs of Chicago, examine trading charts from the day and are stunned to find some oddly compelling shapes and patterns in the data.

To the Nanex analysts, these are crop circles of the financial kind, containing clues to the mystery of what happened in the markets on May 6 and what might have caused the still-unexplained flash crash.

The charts - which are visual representations of bid prices, ask prices, order sizes and other trading activity - are inspiring many theories on Wall Street, some of them based on hard-nosed financial analysis and others of the black-helicopter variety.

To some people, like Eric Scott Hunsader, the founder of Nanex, they suggest that the specialized computers responsible for so much of today's stock trading simply overloaded the exchanges.

He and others are tempted to go further, hypothesizing that the bizarre patterns might have been the result of a Wall Street version of cyberwarfare. They say high-speed traders could have been trying to outwit one another's computers with blizzards of buy and sell orders that were never meant to be filled. These superfast traders might even have been trying to clog exchanges to outflank other investors.

Jeffrey Donovan, a Nanex developer, first noticed the apparent anomalies. "Something is not right," he said as he reviewed the charts.

Mr. Donovan, a man with a runaway chuckle who works alone out of the company's office in Santa Barbara, Calif., poses a theory that a small group of high-frequency traders was trying to introduce delays into the nation's fractured stock-market trading system to profit at the expense of others. Clogging exchanges or otherwise disrupting markets to gain an advantage may be illegal.

David Fuller's view I share the concerns expressed over high-frequency trading in this article. I maintain that the practice is predatory and creates an uneven playing field. It does not take too much imagination to appreciate the risk of market destabilisation if this practice is not reined in. For more on this subject, use this site's 'Search' facility (fourth down, upper left) and search for 'frequency'.

Who is most at risk from high-frequency trading?

Leveraged traders are most at risk, particularly those using futures. Luckily for me I had short positions in stock market futures on May 6th so I was able to profit from the sudden slump. However had I been long index futures it could so easily have led to the triggering of stops, possibly a margin call or perhaps even forced liquidation of my trading positions if losses exceeded capital in the account at the time. Unleveraged investors using stops would have also been at risk.

Active institutional investors are increasingly at risk from high-frequency trading because their bids and offers can be crowded out. Less active investors with unleveraged positions and who do not use stops are probably least at risk, provided they do not panic.

Should we abandon the stock market because of volatility, potentially exacerbated by high-frequency trading? Presumably some have but that seems like an overreaction to me. I would certainly reduce leverage, particularly on long positions. Value investors could conceivably benefit from a sudden and temporary sell-off such as we saw on May 6th, if they are able to react in time.

I have no idea how widespread the practice of high-frequency trading has become outside the USA but I suspect some countries will either prevent it from starting or introduce strict controls.