SEC says no single cause of market plunge

(Reuters) - The top securities regulator said no single event had been found to explain Thursday's mysterious market plunge, but the shocking drop was unacceptable and additional safeguards were coming.

U.S. Securities and Exchange Commission Chairman Mary Schapiro said on Tuesday it would take time to pinpoint the cause and warned that investor confidence could suffer if there were no reforms.

"The markets failed many investors on May 6, and I am committed to finding effective solutions in the very near term," she said in testimony to the U.S. House of Representatives Subcommittee on Capital Markets.

The SEC said after the hearing that it had received recommendations from exchanges and the broker-dealer watchdog Finra for trading curbs and for dealing with erroneous trades. It said it would review them over the next few days.

With U.S. stock markets back near levels before the May 6 debacle, many lawmakers appeared satisfied with the SEC and fellow market watchdog, the Commodity Futures Trading Commission.

"After hearing the testimony from our two regulators I feel a lot more secure," said Paul Kanjorski, the Democrat from Pennsylvania who chairs the subcommittee.

But some Republican members of the committee questioned the wisdom of regulators taking action before the causes of the market roller coaster were clear.

Although Schapiro gave greater weight to theories that a confluence of events were responsible, no regulator or exchange has provided a full account of events or concluded what caused a lightning-fast 700-point drop in the Dow Jones Industrial Average that rattled investors worldwide.

"The sudden evaporation of meaningful prices for many major exchange-listed stocks in the middle of a trading day is unacceptable and clearly contrary to the vital policy objective of maintaining fair and orderly financial markets," Schapiro said.

CFTC Chairman Gary Gensler said his agency asked some traders for "all communications" and positions related to E-mini Standard & Poor's 500 futures contracts. That suggested a more muscular thrust in the complicated probe, and bolstered industry rumors circulating around that contract over the last five days.

Schapiro and Gensler both said that computer-driven high frequency trading (HFT) strategies may have exacerbated the sell-off when some of those firms stopped making markets in stocks and futures contracts.

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