Federal regulators reviewing Thursday's stock plunge will try to determine if the fivefold increase in the number of American equity exchanges has left them unable to manage the biggest surges in volume.
Almost 1.3 billion shares traded on U.S. markets in a 10- minute span starting at 2:40 p.m. New York time, six times the average, sending prices lower on platforms from New York to Kansas City. Nasdaq OMX Group Inc. said it canceled transactions in 286 stocks where swings grew too wide. Federal agencies began inquiries after more than $700 billion in value was erased in an eight-minute span.
“Markets aren't supposed to work this way,” said Jamie Selway, managing director of White Cap Trading LLC in New York and a former chief economist at NYSE Arca, a unit of NYSE Euronext. “There was a mad rush for the exits. We just don't know whether it was accidental or intentional.”
The rout showed how the fragmentation of the U.S. equity market may suppress demand when it's needed most, especially when the New York Stock Exchange attempts to calm trading, said James Angel, a finance professor at Georgetown University in Washington. NYSE Euronext Chief Operating Officer Larry Leibowitz said the Big Board prevented a bigger decline.