[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2010/images/05/11/art.stock.trader.jpg caption="Investigators are still unclear what caused the Dow's 1,000 point drop last week."]
CNN Business News Producer
It’s been five days since the Dow plummeted nearly 1,000 points in less than 10 minutes and there is still no concrete answer to the question: “What the heck happened?”
In testimony before a House Financial Services subcommittee looking into last Thursday’s so-called “flash crash,” executives from the nation's major stock exchanges said the plunge was triggered by a combination of unusual factors, but that its ultimate cause remains a mystery.
Eric Noll, executive vice president of the Nasdaq OMX Group, said in prepared remarks that his exchange continues to investigate, “but has at present located no ‘smoking gun’ that single-handedly caused or explains Thursday's events.”
Larry Leibowitz, chief operating officer of NYSE Euronext, said, “Although some of the underlying economic and global financial conditions that influenced this selling activity are known, the exact succession of events and what precipitated them remain unclear.”
Even SEC chairwoman Mary Schapiro said, "At this point, we are unable to point to a single event which could be the sole cause."
At the same time, the SEC has found no evidence of "fat finger" errors, which occur when a trader mistakenly orders billions of shares instead of millions, Schapiro added. But such trades cannot be completely ruled out as a contributing factor.
In addition, Schapiro said the SEC has found no information to suggest the collapse was caused by hackers or terrorists.
Noll and Leibowitz did tell lawmakers that markets were jittery going into Thursday's tailspin - a factor that could have contributed to the abrupt and panicky selloff. The two executives also indicated that a lack of coordination between exchanges, allowing electronic trading to continue after manual trading had been paused, was indeed a factor.
The SEC and representatives from the six main stock exchanges, along with the Financial Industry Regulatory Authority, agreed on Monday to a “structural framework” aimed at preventing a repeat of the “flash crash.”
That framework would strengthen circuit breakers - the trigger points that stocks need to hit before trading can be halted - and steps for handling erroneous trades.
And as of Monday, SEC staffers are now stationed at all major markets to monitor trading activity.
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Filed under: Andrew Torgan • Economy
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