US lawmakers and regulators are hard at work trying to unravel last week's precipitous 998-point stock market fall, one that many feared, at least initially, signalled the onset of another severe financial crisis.

Pinpointing the cause is crucial. And on a larger scale, the sometimes dizzying speed of change in the equity trading market, which puts a premium on innovation and competition, has made it imperative that regulators act to close gaps that effectively encourage illicit activity in the shadows.

The lag between market innovation and regulation is particularly pronounced in the increasingly fragmented area of equity trading.

There, we have seen a rapid evolution of how and where trading occurs, and how quickly and transparently it is executed.

High-frequency trading, dark pools and direct access are commonplace, compelling regulators to adapt to ensure that participants play by the rules.

A generation ago, fewer than 10 exchanges handled all US equity trades. Today, orders are routed to some 50 competing platforms.

This complex environment creates opportunities for traders seeking unfair advantage to manipulate markets.

They do so by exploiting inconsistencies or gaps created when the responsibility of regulatory oversight is divided.

Regulatory gaps and splintered oversight make it possible for trading abuses - such as market manipulation, marking the close and front-running customer orders - to be carried out furtively across many markets, with a reduced chance of detection.

David Fuller's view By chance, some of us profited from last Thursday's gyrations and we were lucky. It could have so easily gone the other way and undoubtedly did for some. At minimum, most of us saw a temporary drawdown on many long positions.

While regulation does need to take a very close look at high-frequency algorithmic trading, the reality is that regulators will always be attempting to put out fires rather than restraining arsonists before they light them. Leading participants within the high-frequency trading industry have been largely silent about the risk of collateral damage, to my knowledge, which does not reflect favourably on ethical standards.

To paraphrase Paul Volcker, the only positive financial innovation over the past 20 years has been the cash machine.

The great man also said:

"I wish someone would give me one shred of neutral evidence that financial innovation has led to economic growth - one shred of evidence."