MercoPress. South Atlantic News Agency

Panic in Wall Street: Possible Electronic Error Plunges Markets 1.000 Points

All trades between 02:40 and 03:00 PM Thursday are to be cancelled

United States regulators and stock exchanges are searching for answers after what is believed to be an electronic trading error set off a heart-stopping plunge in markets that rivalled the crash of 1987.

Unnerved by fears about Greece’s debt woes, investors were already sending stocks lower early on Thursday, but in mid-afternoon, without any apparent trigger, shares went into free fall. At one point, the Dow Jones Industrial Average (INDEXDJX:.DJI) had tumbled nearly 1,000 points, or 9%, before snapping back. It ended the day down 3.2%.

In a tacit acknowledgment that markets had gone haywire, the Nasdaq (INDEXNASDAQ:.IXIC) stock exchange said it would cancel all trades executed between 2:40 and 3 p.m. Thursday, during which shares oscillated more than 60% beyond earlier levels, though it maintained that its systems had functioned normally. The all-electronic trading platform operated by the New York Stock Exchange (NYSE) said it, too, would annul trades.

Uncovering how 700-billion US dollars of US stock-market value was vaporized in less than 10 minutes is the task ahead for market regulators. Both the Securities and Exchange Commission and the Commodity Futures Trading Commission said they were reviewing Thursday’s “unusual trading” and plan to make their findings and recommendations public.

The abnormal trading activity comes at a delicate juncture for financial markets and Wall Street. Investors are increasingly anxious that European policy-makers are allowing Greece’s debt crisis to spiral out of control and spread to other countries. Many had hoped that the European Central Bank would announce bold steps to rein in borrowing costs on Thursday, which it did not do, prompting shares to lose ground.

Much of the scrutiny will focus on whether computer-driven trading caused or exacerbated the plunge. Such automated trading has long worried some investors and regulators. So-called program trading has often been blamed for the 1987 crash in stock markets, and while the nature of electronic trading has changed radically in the more than two decades since Black Monday, the idea of humans taking a back seat to computers in markets still unnerves many.