Origin of Wall Street’s Plunge Is Still Unclear to Regulators

By GRAHAM BOWLEY NYTimes.com

A day after a harrowing plunge in the stock market, federal regulators were still unable on Friday to answer the one question on every investor’s mind: What caused that near panic on Wall Street?

Through the day and into the evening, officials from the Securities and Exchange Commission and other federal agencies hunted for clues amid a tangle of electronic trading records from the nation’s increasingly high-tech exchanges.  But, maddeningly, the cause or causes of the market’s wild swing remained elusive, leaving what amounts to a $1 trillion question mark hanging over the world’s largest, and most celebrated, stock market.

The initial focus of the investigations appeared to center on the way a growing number of high-speed trading networks interact with one another and with venerable exchanges like the New York Stock Exchange. Most investors are unaware that these competing systems have fractured the traditional marketplace and have displaced exchanges like the Big Board as the dominant force in stock trading. ……

A government official who was involved in the investigation said regulators had moved away from a theory that it was a trading mistake — a so-called fat finger episode — and were examining the links between the futures and cash markets for stocks.  In particular, this official said, it appeared that as stock trading was slowed on the New York Exchange when big price moves started, orders moved automatically to other, electronic exchanges that did not have pricing restrictions.  … Report

DCL: Could the current generation of commercial  CEP tools be used  to check event pattern constraints that would stop automated order switching when one exchange stops trading, …in real time?  If not, then perhaps aid in postmortem analysis of the logs?