WRAPUP 3-U.S. exchanges summoned to DC after market plunge

* SEC calls U.S. exchanges to Washington Monday-source

* Tempers short at lack of answers on market swing

* Lawmaker deplores “casino environment” in trading

* Investors, traders face queasy trading week

(Updates with stock futures, background about trading)

By Jonathan Spicer and Rachelle Younglai

NEW YORK/WASHINGTON, May 9 (BestGrowthStock) – The heads of leading
U.S. stock market operators have been called to Washington for
an emergency meeting on Monday, days after a spine-chilling
plunge in stock prices continued to perplex U.S. regulators.

The meeting, called by Securities and Exchange Commission
(SEC) Chairman Mary Schapiro, is to address whether levers need
to be added in trading systems to halt sudden plunges in
individual stocks, a source familiar with an investigation into
the events said.

Exchange chiefs are also set to face Congressional hearings
on Tuesday, the source said.

The heat is on the SEC to employ emergency measures to
prevent a repeat of Thursday’s scary market plunges, when
stocks usually regarded as safe inexplicably dropped
precipitously for several minutes.

Regulators have still given no indication that they have
any idea what triggered the dive, adding to concerns among
investors over what kind of market they are trading in.

Tempers were short in Washington. Lawmakers wanted to know
why regulators had no answers while the SEC and Commodity
Futures Trading Commission said not to look for quick

“Clearly the Securities and Exchange Commission needs to
act,” an exasperated Sen. Chris Dodd, chairman of the Senate
Banking Committee, said on CBS’s “Face the Nation” program.

“They need to step up very quickly and let us know what
happened here and what steps need to be taken,” he said. “I
don’t think you need legislation in this area. You need the
regulators to step up.”

Speculation initially centred on the possibility that there
was a massive “fat finger” accidental trade by an individual
but that has now been discounted.

Another theory is that a huge computerised trading program
was triggered by a big currency-related play amid the deepening
Greece-related crisis.


The SEC’s meeting, set for Monday morning at 1000 EDT/1400
GMT, will include NYSE Euronext’s (NYX.N: ) Duncan Niederauer and
Nasdaq OMX Group Inc’s (NDAQ.O: ) Robert Greifeld, a source said.

It will discuss whether a market-wide stock-specific
circuit breaker needs to be implemented, ways to possibly rein
in market orders and how to address stop-loss selling, the
source said.

Market orders refer to immediate ‘buy or sell’ orders which
are to be carried out no matter what the stock’s current price
is. Stop-loss selling, put in place to cap investor losses,
refers to stocks being sold at a pre-determined level.

Any new rule would need approval from a majority of the
five SEC commissioners.

The NYSE cut automated trading on its hybrid exchange
during the market’s plunge on Thursday, in an attempt to force
all orders to its human specialist traders on the floor.

However, it had the effect of routing all U.S. order flows
to other electronic venues including its own Arca venue and
rival Nasdaq. The NYSE is a two-tiered exchange with both
electronic and manual trading.

Investors could face queasy trading this week with markets
still jittery after Thursday’s nearly 1,000-point drop in the
Dow Jones Industrial Average, followed by a rebound that still
left prices down for the day. After another decline on Friday,
stocks are now negative for the year to date.

“Like most people I’m just surprised an investigation of
the last few days didn’t provide more information,” said Rick
Meckler, president of investment firm Libertyview Capital
Management. Meckler said that if the cause remains a mystery it
will undermine confidence over the course of the year.

Still, S&P 500 stock index futures (SPc1: ) pointed to a
higher open, up more than 20 points on Sunday evening in New
York, as European Union finance ministers agreed on emergency
measures to prevent Greece’s debt crisis causing turmoil in
other euro zone countries. For details [nN09165863]


Dodd, who appeared on CBS with Republican Sen. Richard
Shelby of Tennessee whose assistance he needs to steer a
massive financial regulatory bill through the Senate, deplored
the fact that sophisticated markets were so out of touch with
the real economy that ordinary Americans live in.

“We need some answers pretty soon,” he said, because unruly
markets are a threat.

“You are getting some of this casino environment that is
appearing in our markets,” Dodd said, fostering economic risk
that will force the government’s hand on regulation.

“We need to get in place a bill, have the president sign it
so that we have tools to protect our economy from these kinds
of events,” he said.

Sources said on Saturday that the SEC was considering
whether trading restrictions could be imposed across markets
for companies that have fallen a certain percentage within a
specific time-frame. One source said more circuit breakers at a
stock level was another possibility.

Investment Tools

(additional reporting by Phil Wahba and Chris Sanders;
additional reporting and writing by Glenn Somerville in
Washington and Megan Davies in New York; Editing by Diane Craft
and Raju Gopalakrishnan)

WRAPUP 3-U.S. exchanges summoned to DC after market plunge