SEC: Unclear what led to drop

May 12, 2010 at 12:00a.m.

Associated Press

WASHINGTON

The head of the Securities and Exchange Commission told a congressional panel Tuesday that regulators need more time to figure out what caused last week’s stock market plunge.

SEC Chairman Mary Schapiro said her agency has yet to pinpoint the reason for the sell-off that sent the Dow Jones industrial average falling nearly 1,000 points in less than half an hour.

“We will move as quickly as we can, but I can’t give you a final date,” SEC Chairman Mary Schapiro said at a hearing examining the historic market drop.

The agency’s review found no evidence of terrorist activity or computer hacking. There also was no evidence “that this was done in any kind of a malicious way,” Schapiro said.

Schapiro said establishing a stronger system for slowing trading during periods of high volatility would help.

Six major U.S. securities exchanges agreed in principle Monday to a uniform system of “circuit breakers,” which could slow trading during sharp market swings. Most of the 50 U.S. exchanges regulate themselves and design their own tools for slowing or halting trading.

Lawmakers and Schapiro acknowledge the plunge has undermined confidence in the financial markets.

“We must quickly analyze what happened and embrace reforms in order to restore market integrity and promote investor confidence,” said Rep. Paul Kanjorski, D-Pa., chairman of the House Financial Services subcommittee that oversees market regulation.

Last week’s market free fall highlighted the growing complexity and diversity of the securities market. Upstart electronic trading platforms now compete with the traditional exchanges, and powerful computers give traders a split-second edge in buying or selling stocks.