Insiders testify that flash crash gave investors cold feet

Speaking before a joint committee of the U.S. commodity and equity regulatory agencies, financial industry executives say the May 6 flash crash that saw the broad stock market lose 10 percent of its value in minutes shook investor confidence so severely that many are still too spooked to trade.

A common theme among those speaking was that the day's extreme volatility, however rare historically, looms in the mind of individual investors and has created a fear that computerized trading systems have too much influence on the market.

The statements were delivered as part of a meeting of an advisory committee managed by the Commodity Futures Trading Commission (CFTC) and Securities & Exchange Commission designed to explore "emerging regulatory issues." According to CFTC Chairman Gary Gensler's opening comments, the committee, which has been studying the flash crash issue for three months, will deliver a report on its findings in "early September."

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