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Origin of Wall Streets Plunge Continues to Elude Officials
Key Excerpts from Article on Website of New York Times
Posted: May 10th, 2010
http://www.nytimes.com/2010/05/08/business/08trading.html
A day after a harrowing plunge in the stock market, federal regulators were still unable on Friday [May 7] to answer the one question on every investors mind: What caused that near panic on Wall Street? The cause or causes of the markets wild swing remained elusive, leaving what amounts to a $1 trillion question mark hanging over the worlds largest, and most celebrated, stock market. The initial focus of the investigations appeared to center on the way a growing number of high-speed trading networks interact with one another and with venerable exchanges like the New York Stock Exchange. Most investors are unaware that these competing systems have fractured the traditional marketplace and have displaced exchanges like the Big Board as the dominant force in stock trading. In a joint statement issued after the close of trading, the S.E.C. and the Commodity Futures Trading Commission said they were ... looking particularly closely at how different trading rules on different exchanges, which temporarily halted trading on some markets while activity in the same stocks continued on other markets, might have contributed to the problem. The pressure in the less-liquid markets was amplified by the computer-driven trades, which led still other traders to pull back.
Note: For more information on the impact of the new high-speed computer-driven trading methods, click here.
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