Actually there WERE enough orders to satisfy the selling, the problem was that the order volume was mostly HFTs that were trading with each other in S&P e-minis. The algorithm was judging the liquidity of the market based on VOLUME, not based off absorption of the securities.
Absorption is when some buyers enter the market, buy stuff, then walk away and sell it at a much later time while everyone else in the market has moved on. They may come back a few hours later to re-sell now that the price has gone higher, but they're not recycling the same securities and getting them handed back to them on the very next trade.
Look at it this way from a programming point of view. You have 2 threads that are sitting on the side, and juggling the same balls between each other. The balls are worth $1,000 each and there are 100 of them being juggled.
So as the stupid hedge fund manager, you insert an order to sell off 5,000 balls at $999 a piece. The order fills for $950 and the two threads pick up the extra 5,000 balls. And now they are trading 5,100 balls between each other, and the price now stabilizes between $950 and $960 per ball. The new balls being passed around have less value because there's more of them in the market so there is dilution, but there is trading volume---which PORTENDS a normal investor to think there is liquidity, but there isn't---because there is no absorption and there's no sideline money... it's an empty market with a few players doing a massive amount of volume.
So take the same situation but now the stupid hedge fund manager starts POURING balls into the 2 threads. Now they are overloaded with volume and trading activity is higher, but there's no sideline money and the number of threads hasn't changed, so now the market has gone beyond saturated. The price per ball plummets.
The balls are linked to other objects which have value, and these start going down (we're talking futures contracts now). Because the OUTSIDE market is already heavily down, the futures that were being depressed triggered program trading---sell sell sell... cover your ass, don't get burned, don't ride this ship down. So now you have a full-on stampede.
NOW you have people that were holding the e-mini contracts that were asleep during this episode suddenly awake with alarm, and they start to sell because now their contract hedge is going down the toilet. You now have a perfect shitstorm of selling.
When Arca put on SLOWDOWN and the e-mini pit recovered after the order finished executing, then you had a stampede of buying from all the traders who saw immediate discounts on everything---everything is now on sale at Dollar Store discount bargain prices. So in a split second, it's now BUY BUY BUY!!!
And more than 50% of that snap recovery were all the folks and program traders trying to reverse their downside trades. They sold low---so they tried to grab all their positions back before they had to print a loss for the day.
In other words, a shitstorm of VERY smart people dumped into unloading a lot of holdings just because one simple program went "BOO!". They saw their collective mistake, and in a few minutes, they tried to reverse the damage so they wouldn't have to report losses.
While the episode went down though, a LOT of people in the tri-state area were having heart attacks.