Last month's dramatic plunge in U.S. share prices was probably due to stock market fragmentation and not to high-speed trading, Craig Donohue, chief executive of the CME Group, said on Tuesday.
The May 6 "flash crash" rattled investors globally and exposed deep flaws in the high-speed U.S. marketplace.
The Dow Jones industrial average plunged some 700 points in minutes before sharply rebounding that afternoon.
"It has very little or nothing to do with high frequency trading and very much to do with cash equities fragmentation," Donohue told a London derivatives week event.
The splitting up of the U.S. share market into 50 to 60 venues meant a "complete total lack of regulatory oversight," the head of the largest U.S. derivatives exchange added.
Worries over the euro zone sovereign debt crisis and investors pulling liquidity combined to create a "volatile mixture," Donohue said.
In contrast, the derivatives trading sector has curbs that would have kicked in to protect investors, he added.
Regulators are encouraging exchange trading and central clearing of derivatives contracts currently traded bilaterally between banks in a bid to cut risks.
Donohue said the CME Group will look to add value in clearing and look for ways to be complementary to off-exchange market participants.
EU share trading rules known as MiFID have also fragmented the European share trading market and the bloc's regulators are looking if lessons can be learned from the flash crash.
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