Regulators Probe Share Plunge After Market Panic

SEC said it would review the unusual trading activity and 'take appropriate steps to protect investors'

U.S. regulators have launched an inquiry into the dizzying Wall Street plunge that left stock market participants shaken after a wave of panic that dented confidence around the globe.

U.S. markets were set to reopen on May 7 after the New York market panic spread to Asia and Europe and the factors behind the record plunge on Wall Street remained unclear.

The Securities and Exchange Commission and the Commodity Futures Trading Commission said on May 6 the regulatory agencies and exchanges were "to review the unusual trading activity" and would "take appropriate steps to protect investors." The tumultuous session on Wall Street saw the blue-chip Dow Jones Industrial Average saw a drop of nearly 1,000 points in a matter of minutes, raising fears of a meltdown.

The Dow later recovered, closing down 3% or 348 points -- a steep drop under normal circumstances. But spooked traders were left shaking their heads.

The panic appeared to engulf Asian markets on May 7, with the fundamental issue for investors deepening fears that Greece's debt crisis would spread through Europe.

The House Capital Markets Subcommittee scheduled a hearing on the causes of market drop.

The unusual trades affected major stocks such as Procter & Gamble, which dropped 37% in at one point, and 3M, which plunged 25% setting off a chain reaction of computer-generated selling.

The panic appeared to engulf Asian markets on May 7, with the fundamental issue for investors deepening fears that Greece's debt crisis would spread through Europe.

Eric Ryan, spokesman for the New York Stock Exchange, ruled out technical problems on the exchange: "We did not have any glitches or technical issues." The tech-heavy Nasdaq exchange said it was investigating what happened and would cancel trades with a precipitous drop during the wave of selling.

Rumors swirled that a major firm, possibly Citigroup, accidentally triggered a trading program worth $16 billion, instead of 16 million, at the CME Group's Chicago Mercantile Exchange. However, the CME said that trading by Citigroup in its stock index futures markets "does not appear to be irregular or unusual in light of market activity today."

At the close, the Dow had recovered to 10,520.32, a drop of 347.80 (3.20%.)

The Nasdaq slid 82.65 points (3.44 percent) at 2,319.64 while the Standard & Poor's 500 index tumbled 37.72 points (3.24 percent) to 1,128.15.

Copyright Agence France-Presse, 2010

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