Human Error Said to be Source of Huge Market Selloff

(FOXBusiness)A fat-fingered trader may not have caused the 998-point drop in the stock market two weeks ago, but some type of human error appears to be the source, according to the preliminary findings of a government study into the massive market decline, FOX Business has learned.

The final report, to be published by the Securities and Exchange Commission, could be made public as early as today, FOX Business has learned, and it will lay out the causes of the market plunge that has renewed calls for a more coordinated market structure, along with increased regulation of the securities markets.

But according to people with knowledge of the study’s preliminary findings, there was some human error, or as one person with direct knowledge of the report told FOX Business, a “poorly handled order,” at the Chicago Mercantile Exchange, which touched off massive trading in the markets, particularly at the New York Stock Exchange.

At that point, specialists on the floor of the exchange stopped making markets in various stocks that began to trade lower on other exchanges that don’t slow down trading, as the NYSE does in times of stress.

According to people with knowledge of the preliminary findings, the entire market plunge lasted 17 minutes, but the last three minutes saw a massive amount of selling from retail brokers who sold stock on behalf of individual investors.

It’s unclear if these points will be made in the final report when it is publicly released, or in what form they will be disclosed.

An SEC spokesman declined to comment on the matter.

When the markets plunged two weeks ago, rumors circulated that a “fat fingered” trader at Citigroup (C: 3.88, 0, 0%) was responsible for the market plunge by typing in an order to sell billions instead of millions. Regulators quickly discounted that rumor and began to investigate the market decline.

Since then, market experts have been pointing to faulty computer programs at the NYSE as the cause and a lack of market integration.

For its part, CME Group (CME: 316.05, 0, 0%) said in a statement that it apologizes for delays in its messaging systems on May 6 that affected clearing firms. Its clearinghouse staff added systems to handle what it called increased message flow. It did not specifically mention any trader or firm.