Questions Remain on What Caused Market Plunge

Reported by Scott Cohn, written by Michelle Lodge

The big question of what went wrong when the markets plunged Thursday is still up in the air.


At this stage, what's in store for investors are a spate of finger-pointing between the heads of the NYSE and Nasdaq and a review by government regulators of the exchanges' trades.

One theory, now discounted, is that the freefall happened as a result of trades of e-minis at the Chicago Mercantile Exchange.

An e-mini is a product developed in the nineties to make the S&P 500 futures more liquid. It’s a smaller size contract traded electronically.

In a prepared statement, the CME said, "The CME Group markets functioned properly yesterday despite significant market activity due to global macroeconomic conditions and apparent problems that resulted in the cancellation or 'busting' of securities transactions by the Nasdaq Stock Market and the NYSE."

The battle of the words aside, in process now is a review of exactly what happened.

Here’s how it will unfold:

The Securities and Exchange Commission, specifically its Division of Trading and Markets, and the Commodities Futures Trading Commission, will first analyze data from the exchanges and FINRA.

Their mission is to determine whether the drop was tied to a specific trade or series of trades, was a mistake or was caused by some other factor.

The Treasury Department is also playing a key role in the review. Said President Obama on Friday: "The regulatory agencies are evaluating this closely, [with] concern for protecting investors and preventing this from happening again."

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