As a doctoral candidate in physics two decades ago, Gregg E. Berman spent most of his time in a laboratory searching through subatomic data for an elusive particle called the heavy neutrino. Today, from his office at the Securities and Exchange Commission, the former physicist is supervising a team of more than 20 investigators who have spent the last five months scrutinizing stock-trading data interview transcripts in an effort to figure out why stock prices went into free fall for 20 terrifying minutes on May 6th.
“What everybody would love to hear from the SEC is that XYZ trader blew up the market and made a gazillion dollars and is now in jail.”
Gregg E. Berman, head of an inquiry into the crash, said he will show how conditions and events led to an abrupt drop. (Photo: The New York Times).
Their long-awaited report on the so-called flash crash, in partnership with the Commodity Futures Trading Commission, is due to be published in the next two weeks, the New York Times reports.
Mr. Berman (44) will not say exactly what will be in the report, but he says that it will not simply restate what regulators have already said — that markets were volatile because of worries over the debt crisis in Europe, causing some computerized trading programs to stop trading, and finally causing computers on other exchanges to misread the pullback as a rapid bidding down of stock prices.
Instead, he says, the report will focus on a specific sequence of events that preceded the crash.
He says it will tell a clear story about what happened in the markets on that stomach-churning day, beyond simply pointing a finger at the perils of the kind of high-speed computer trading that dominates today’s markets.
“The report will clearly demonstrate how market conditions and events prior to the flash crash led to the extreme price moves.”
Some blame the high frequency trading for the so-called "flash crash" on May 6th.
When pressed, he adds, notably, that he had found no evidence of a deliberate attempt by anybody to disrupt markets.
The implications of the report are not merely academic.
Ordinary investors, shaken by the brief stock plunge and the lack of an official explanation, have withdrawn money from stock mutual funds every week since the crash.
The Berman report will not be the final word on the matter. Its findings will be used by a group of advisers to the S.E.C. and the commodity futures commission, which will make policy recommendations.
Still, some analysts question whether the report can deliver a simple answer that will satisfy everyone eager for reassurance.
“What everybody would love to hear from the S.E.C. is XYZ trader blew up the market and made a gazillion dollars and is now in jail,” says Larry Tabb, chief executive of the Tabb Group, a specialist on the markets.
“The answer, I think, is much more complicated and nuanced and has to do with a lot of different things. I am not sure that everybody outside the industry is going to have the patience to understand that.”
Market analysts say investors want to be reassured about the integrity of the nation’s markets so they can be confident that a nose dive will not happen again.
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