The top U.S. securities regulator said markets failed many investors when they suddenly fell nearly 1,000 points last Thursday afternoon and vowed to rectify the situation quickly.
I believe that the full range of potential solutions must be on the table, Securities and Exchange Commission Chairman Mary Schapiro said in prepared remarks to be delivered to Congress on Tuesday.
The SEC, other regulators and the major U.S. exchanges have agreed that a circuit breaker, or a pause in trading, is needed to help act as a shock absorber when markets are in free-fall.
Five days after the Dow Jones Industrial Average fell 9.2 percent in a matter of minutes, regulators still have not gotten to the bottom of what caused the unprecedented swoon.
Schapiro said the rise of fast trading and new technologies has impeded regulators' efforts to get to the root of the problem. Without dismissing some hypotheses such as the fat finger trader, Schapiro said regulators and the exchanges' reviews have yet to uncover the error.
Likewise, Schapiro said there did not appear to be any unusual trading in Procter & Gamble Co's stock ahead of the decline. Speculation was that large trades in Procter & Gamble may have triggered the broader sell-off.
Although Schapiro said the drop in stocks followed the drop and recovery in the value of the E-mini Standard & Poor's 500 futures contracts, she said the fact that stocks prices follow futures prices chronologically does not demonstrate what might have triggered the price movements.
(Reporting by Phil Wahba and Rachelle Younglai, editing by Gerald E. McCormick)