WASHINGTON — Federal regulators said Monday they are looking at whether big trading firms abandoned the market during the massive sell-off May 6 rather than providing cash support required under law.
Securities and Exchange Commission staffers said the possible retreat of big “liquidity providers” during the market plunge is an area of focus in the investigation. Major securities firms are required by law to remain in the market by buying and selling stocks; high-speed electronic trading firms are not. Some firms that act as liquidity providers stopped doing so during the free fall, SEC officials found.
Those findings were presented at the first meeting of a special advisory committee to the SEC and Commodity Futures Trading Commission.
The panel is examining what sent the Dow Jones industrials down nearly 1,000 points in less than 30 minutes.
