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 exact 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.
Some causes have been ruled out, she said. 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 on Monday agreed in principle 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.
The plunge also underscored the growing importance of options trading, which allow investors to trade based on expectations for a particular stock, or group of stocks, to rise or fall, rather than simply trading the underlying stock.
Executives of the New York Stock Exchange and Nasdaq plan to tell a House panel that they are capable of policing themselves. But they agree that broad changes to the system of overseeing the financial exchanges are needed.
Larry Leibowitz, chief operating officer for NYSE, says in his prepared testimony that a more uniform system of circuit breakers would slow trading when share prices plummet. He also says one self-regulator with access to all trading data might best oversee all the exchanges. The vast network of self-regulators has made it harder for SEC officials to investigate the chaotic trading, Leibowitz says.
"Any single exchange has access to only the data from trades sent to or executed on that exchange," Leibowitz says in his testimony. "When a trading problem occurs . . . there is no central mechanism to coordinate a market-wide response."
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