U.S. authorities on Friday were investigating the cause of a nearly 1,000-point plunge in the Dow Jones industrial average that left many investors gasping.

The Securities and Exchange Commission launched a probe, which would look for any wrongdoing related to the stock market selloff, a source familiar with the matter said.

Senior White House adviser Christina Romer also expressed concern and said the U.S. Treasury was closely following investigations by the SEC and the Commodities Futures Trading Commission.

We need to keep investors, market participants safe, she told Reuters Insider.

The stocks meltdown stemmed from growing concern about the Greek debt crisis and was widely believed to have been exacerbated by at least one large erroneous trade. It sparked outrage among investors and politicians.

We cannot allow a technological error to spook the markets and cause panic, Rep. Paul Kanjorski said late on Thursday.

This is unacceptable. A U.S. House of Representatives panel chaired by Kanjorski will examine the causes of the market swoon at a hearing next Tuesday.

Whatever happened yesterday in the beginning, there were wide consequences, said Ralph Cole, portfolio manager, Ferguson Wellman Capital Management of Portland, Oregon, whose firm manages about $2.5 billion. High frequency and algo traders are an easy target, wrong or right, and they'll face more scrutiny.


The Dow fell as much as 279 more points in Friday morning trading, but there was no sign of the kind of uncontrolled selling that wracked the market on Thursday. In the selloff, stocks like Accenture and Boston Beer plunged to just 1 cent per share.

SEC Chairman Mary Schapiro canceled a Friday appearance at an industry trade group breakfast to focus on Thursday's selloff, said a colleague who attended the event in her place.

She felt it was important to remain at the office and follow up on unusual trading activity that took place briefly yesterday afternoon, said Andrew Donohue, director of the market watchdog's Division of Investment Management.

The SEC said on Thursday it was working closely with the Commodities Futures Trading Commission to review the unusual trading, which at its deepest point wiped nearly $1 trillion off equity values.

U.S. Treasury Secretary Timothy Geithner on Thursday held a conference call with Federal Reserve Chairman Ben Bernanke as well as with regulators from the SEC and the CFTC, a source said.

One bank linked by some investors to the erroneous trade rumors, Citigroup Inc, on Friday said there was no basis for rumors it was responsible for a massive trading error.


Based on our review, rumors about a trading error by Citi are unfounded. It is troubling that inaccurate and unfounded rumors were spread as far as they were, Citi spokeswoman Shannon Bell said in an email.

The Nasdaq Stock Market early on Friday widened its list of stocks that will see canceled trades, and the focus turned to derivatives and regulators.

Trades that took place during the worst of the meltdown will be canceled for more than 250 stocks, Nasdaq OMX Group Inc said, adding to the long list of busted transactions on NYSE Euronext's Arca, other exchanges and trading venues.

The unusual exchange-wide agreement to cancel trades in stocks raised questions for futures and options markets, where many contracts are based on underlying stocks and stock indexes.

CME Group Inc, the giant futures market, had no immediate comment on whether it would cancel or adjust trades. Two major futures trading firms said CME had given no notice that trades would be broken.

A source said it is likely options trades based on the equities trades that were canceled would be adjusted, not busted.

At least one high-frequency trading firm said it stopped trading during the worst of the selloff, raising questions about the reliability of the all-electronic market-makers that provide much liquidity in today's markets.

(Additional reporting by Ross Kerber, Dan Wilchins, Pedro Nicolaci da Costa; Editing by Derek Caney, Steve Orlofsky and John Wallace)