Money managers, academics and regulators converged here on Wednesday to discuss the flash crash that three months ago sent the stock market plunging 700 points within minutes and shook investors' confidence.
Executives from money managers BlackRock Inc and Invesco Ltd, and retail broker TD Ameritrade Holding Corp, were among those meeting at the Commodity Futures Trading Commission to discuss what the May 6 crash meant for investors.
Regulators convened an advisory committee shortly after the crash to learn how brokerage houses, issuers, institutional traders and retail investors were affected.
Neither the CFTC nor the Securities and Exchange Commission have fully explained what caused the Dow Jones industrial average to plunge so dramatically before sharply rebounding that afternoon.
SEC Chairman Mary Schapiro said the trade-breaking process for erroneous trades done after the crash was neither clear nor transparent and has created uncertainty for investors about how such trades would be handled in the future.
The SEC is also considering whether to deter or regulate the use of stub quotes for market markers, and is studying the use of trading pauses, price collars and self-help rules used at individual exchanges.
In early September, regulatory staff will issue a follow-up report on the crash, CFTC Chairman Gary Gensler said. The advisory committee will consider the report and make recommendations, perhaps this autumn, he said.
Regulators and exchanges have thus far pointed to a rare alignment of events that day in the high-speed, electronic marketplace in which stocks, futures and exchange-traded funds trade simultaneously on dozens of venues at record volumes.
Disparate exchange rules, a lack of liquidity and market jitters over Europe's escalating debt crisis are believed to have played a role in the flash crash, prompting a handful of new rules including market-wide circuit breakers for stocks.
There are some very reasonable explanations for why certain things happened that day in terms of the interactions between the futures, options and equities markets, given the different rules, said Adam Sussman, a senior analyst focusing on market structure at consulting group TABB Group.
That all points to some structural flaws in the way the market operates, and now they're patching it up, he added.
Although exchanges canceled thousands of trades after markets closed, the crash brought steep losses to some.
Trading volumes, meanwhile, have dropped precipitously from the record highs reached in May. Worries have grown that whipsawed investors, particularly individuals, have retreated from the sharp volatility.
CFTC's Gensler and the SEC's Schapiro are expected to attend the Wednesday meeting of the Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues.
(Reporting by Jonathan Spicer; Editing by Derek Caney and Maureen Bavdek)