Exchanges Cooperate As Regulators, Lawmakers Probe Markets

The two biggest U.S. stock exchange operators said Sunday they are working together to help regulators determine the factors behind the still-unexplained swings in stock prices on May 6.

After trading barbs Friday, NYSE Euronext (NYX) and Nasdaq OMX Group Inc. (NDAQ) issued a joint statement Sunday committing to collaboration as exchanges, regulators, lawmakers and investors continue to seek answers for the dramatic market volatility of Thursday.

NYSE Euronext Chief Executive Duncan Niederauer and Nasdaq CEO Bob Greifeld will join their counterparts from BATS Trading and Direct Edge in a Monday meeting with Mary Shapiro, chairman of the Securities and Exchange Commission, according to people familiar with the situation. Shapiro called for the meeting Friday to address how disparate market rules could have affected last week's wild gyrations.

A sudden drop in share prices Thursday sent the Dow Jones Industrial Average plunging by nearly 1000 points and saw many stock prices drop to a penny, before a sudden upswing saw the market regain much of the losses.

Lawmakers have scheduled a hearing in Washington on Tuesday to look into the matter, and U.S. securities and futures regulators are working together to get a fix on what caused it. A coordinated effort among market operators is seen ensuring that regulators have access to all relevant data as officials work to prop up investors' shaken confidence in the functioning of U.S. markets.

"We commend the Securities and Exchange Commission for their continued leadership during this critical time in global markets and agree that a constructive process will promote confidence in the financial markets by investors, listed companies and market participants," said representatives of NYSE Euronext and Nasdaq OMX in a statement Sunday.

However, CME Group Inc. (CME) is not expected to be represented at the committee meeting, despite concerns last week about the interaction of cash and futures markets on securities prices. Stock and futures exchanges have all insisted that their systems functioned normally during last Thursday's frenetic activity, deepening the mystery of the underlying cause.

On Friday, a senior Obama administration official told Fox Business Network that a so-called "fat-finger" error was not at the root of Thursday's price swings, cooling speculaton of one possible cause.

The root of the market chaos remains unknown after three days. Theories range from turmoil in Greece leading to a knock-on effect of selling in algorithmic trading systems to concerns of a cyber attack aimed at locking up exchange systems with a flood of orders.

Top executives of NYSE Euronext and Nasdaq OMX clashed early Friday over the two markets' divergent approaches to handling Thursday's price volatility. The New York Stock Exchange slowed trading in some stocks to allow traders to determine an appropriate price as valuations plunged in electronic trading, a move that Nasdaq OMX and other exchanges suggested may have contributed to broader price slides.

Earlier Sunday, Nasdaq OMX announced it has canceled trades made Thursday in 12 additional stocks in which prices were at least 60% above the prior number, or at least 60% less than the earlier price. The additional names mostly included exchange-traded funds and notes, following estimates of 4,000 cancelled trades across nearly 300 symbols previously announced.

-By Jacob Bunge, Dow Jones Newswires; 312-750-4117; jacob.bunge@dowjones.com

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