The New York Stock Exchange (NYSE) suffered further embarrassment yesterday after the US Securities and Exchange Commission confirmed that it would investigate the circumstances around the bourse’s technology meltdown.

The inquiry surfaced as the world markets endured a third day of losses, with further falls on both sides of the Atlantic. Investor fears, triggered on Tuesday by plunging share prices in China and uncertainty about the US economy, sent the Dow Jones industrial average down 34.30 points, to close at 12,234.30. The FTSE 100 dropped 55.50 at 6,116.0.

The SEC said that its investigation would seek to “evaluate whether enhancements to capacity management are necessary” after the exchange’s electronic trading system was frozen by a surge in trading as a plummeting Chinese stock market triggered a global sell-off of shares.

The NYSE has invested hundreds of millions of dollars to create a hybrid system – a combination of human and electronic trading – and spent millions of dollars advertising its merits, which include cheaper and faster executions. The SEC could force the exchange to make changes to improve the system. The bourse is also hoping to improve its technology by merging with Euronext, a pan-European bourse based in Paris with a sophisticated electronic trading operation.

A spokesman for the NYSE said that the technology glitch, which forced traders to execute trades using scraps of paper during Tuesday afternoon, was not related to the significant job cuts on its trading floor this year. The servers simply became overwhelmed by the huge volume of activity as the NYSE system struggled to cope with the record 2.41 billion shares that changed hands that day.

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