The Flash Crash, in Miniature

BlackBerrys were buzzing inside Progress Energy in Raleigh, N.C.: in a blink, the 102-year-old utility had been virtually wiped out on Wall Street.

For no apparent reason, Progress’s share price had plunged almost 90 percent. In a matter of seconds, a company with 3.1 million customers and 11,000 employees had all but vanished on the nation’s stock market, and Progress executives had no idea why.

In the anxious hours that followed, the answers began to come clear: the harrowing plunge in the early afternoon of Sept. 27 had been a mini flash crash — a small-time version of the stock market’s wild day last spring.

Since the Dow Jones industrial average fell about 700 points then largely recovered on May 6, setting the financial world on edge, similar flash crashes have occurred with alarming frequency in more than a dozen individual stocks.

Citigroup, Core Molding, the Washington Post Company — all have soared, plunged, and often both, in wild, seemingly inexplicable trading. An exchange-traded fund, a popular investment that is basically an index fund that trades like stocks, has also been given the flash treatment, although that was attributed to a software error.

To some analysts, these mini flash crashes are a sign that another big one is possible, if not probable. Others say these abrupt reversals are simply the way modern, lightning-quick markets work, and that investors had better get used to it.

The crashes continue even as Washington regulators investigate the structure of modern markets and as a report traced the main trigger of May’s big crash to a poorly timed trade by a mutual fund in Kansas. Regulators have put in place circuit breakers to halt trading and reset prices in case stocks plunge. But some analysts fear that one day, these mechanisms could be overwhelmed.

And to corporate executives caught in the middle, it is all just plain hair-raising — and still puzzling.

That September afternoon, with fearful investors on the phone from New York, Mark F. Mulhern, Progress Energy’s chief financial officer, was told by the exchanges that it was all a mistake. A wayward keystroke by a trader somewhere had unleashed a powerful computer algorithm that had devoured Progress Energy’s stock in moments.

Progress Energy stock was trading at about $44.57 a share, and a dealer at an unidentified brokerage firm had entered a mistaken sell order into a computer that instantly drove the price to $4.57. Dozens of trades were declared void, and after a five-minute halt, normal trading resumed.

Mr. Mulhern says he still does not really know what caused the sell-off — and worries what mini flash crashes like this one are doing to investors’ confidence in the stock market.

“It is a little disconcerting when a trade like this could cause this kind of havoc,” he said. “It has got implications for the confidence in our markets. I don’t know what caused it, to tell the truth. The one hesitation all investors have about the market is the drift to so much electronic trading. It is so fast and real time, you have to wonder a little bit how these things happen, and can the regulatory procedures, the stop measures, can they really keep up with the technology?”

Robert F. Drennan Jr., the vice president for investor relations at Progress Energy, said he had reviewed the trading records and had noticed unusual trading activity in the run-up to the plunge. He said Progress Energy was not a heavily traded stock; it may go for several seconds without a trade. But before the price fell, “There was a big ramp-up in the trades, hundreds of trades a second,” he said.

Mr. Mulhern said he received calls from worried investors, including hedge funds: “When the hedge funds call up and start to complain, you know you have a problem.”

The fall set off circuit breakers the exchanges had put in place after May 6. The circuit breakers are intended to halt trading of a stock for five minutes if its price changes by 10 percent within a five-minute period, and thus to stop panic from spreading.

In the case of Progress Energy, the circuit breaker worked on the New York Exchange, Mr. Mulhern said, but trading happens so fast that before other exchanges could also halt trading, the company’s stock price continued to fall on the Nasdaq, all the way down to $4.57.