Origin of Wall Street’s Plunge Continues to Elude Officials

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.

The silence from Washington cast a pall over Wall Street, where shaken traders returned to their desks Friday morning hoping for quick answers. The markets remained on edge, as the uncertainty over what caused Thursday’s wild swings added to the worries over the running debt crisis in Greece.

In a joint statement issued after the close of trading, the S.E.C. and the Commodity Futures Trading Commission said they were continuing their review. And the two agencies indicated they were looking particularly closely at how different trading rules on different exchanges, which temporarily halted trading on some markets while activity in the same stocks continued on other markets, might have contributed to the problem.

“We are scrutinizing the extent to which disparate trading conventions and rules across various markets may have contributed to the spike in volatility,” the statement said.

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.

The pressure in the less-liquid markets was amplified by the computer-driven trades, which led still other traders to pull back. Only when traders began to manually respond to the sharp drop did the market seem to turn around, said the official, who spoke on the condition of anonymity because the investigation was not complete.

On Friday evening, another government official directly involved in the investigation said that regulators had not yet been able to completely rule out any of the widely discussed possible causes of the market’s gyrations.

This official, who also spoke on the condition of anonymity, said that regulators had collected statistical and trading data from stock and futures exchanges, and had begun cross-analyzing that with trading reports from brokerage firms and large market participants. Regulators have also gathered anecdotal accounts of what happened from hedge funds and other trading firms.

The two major regulatory agencies — the Securities and Exchange Commission and the Commodity Futures Trading Commission — have generated multiple memos detailing what they have found and offering possible causes for the market events. Among the issues discussed in the memos, the official said, were the disparate rules that different stock exchanges have for dealing with large price movements on the same securities and how prices on futures markets and stock exchanges appeared to lead or follow each other’s movements down and back up.

The lack of a firm answer, more than 24 hours after the market’s plunge Thursday, left some on Wall Street frustrated.

“The problem is you don’t come in and find out what the clear answer is,” said Art Hogan, the New York-based chief market analyst at Jefferies & Company. “We don’t have the clear explanation for how it happened.”

Others, however, said it would take time to pinpoint what happened given the increasingly complex nature of modern stock trading.

Over the last five years, the stock market has split into a plethora of new competing hubs and trading outlets, a legacy of deregulation earlier this decade and fast-paced technological change. On Friday, the rivalry between the two main exchanges erupted into view as each publicly pointed the finger at the other for being a main cause of the collapse on Thursday, which sent shockwaves around the globe.

“This is the sort of situation that has been a worry for a long time, but the markets have changed in a way that has made things more difficult,” said Robert L. D. Colby, former deputy director of trading and markets at the S.E.C. “They’ve become more fragmented, so it’s harder for any one exchange to see the full picture and take action.”

On Friday, President Obama sought to provide reassurance that regulators were working to find the root of the problem.

“The regulatory authorities are evaluating this closely with a concern for protecting investors and preventing this from happening again,” the president said.

The absence of a unified system to halt trading in individual stocks led to bitter accusations between exchanges on Friday. Robert Greifeld, chief executive of Nasdaq OMX, appeared on CNBC to criticize the New York Stock Exchange for halting trading for up to 90 seconds in half a dozen stocks on Thursday.

“Stopping for 90 seconds in time of crisis is exactly equivalent to not picking up the phone,” Mr. Greifeld said.

A few minutes later, Duncan L. Niederauer, chief executive of NYSE Euronext, responded in an interview on CNBC, blaming Nasdaq’s computers for continuing trading while the market was in free fall.

“These computers go out and just find the next bid they can find,” he said.

Mr. Niederauer acknowledged the need to introduce circuit-breakers along the lines of those already in place on the Big Board, and his views were echoed by some chief executives of the new exchanges.