A congressional panel will explore how to better protect U.S. capital markets after the May 6 flash crash that rocked investor confidence and exposed flaws in the vast trading network.

Top regulators Mary Schapiro and Gary Gensler will testify Wednesday on potential remedies to the deeply fragmented markets, where high frequency traders increasingly dominate trading across about 50 different venues.

A report by their agencies, the Securities and Exchange Commission and Commodity Futures Trading Commission, found that a large trade by a single trader helped send the Dow Jones Industrial Average down nearly 700 points on May 6 in minutes before recovering.

But had there been safeguards in place and coordinated rules across the bevy of trading venues, some companies would not have seen their stocks temporarily lose nearly all their value in seconds and investors may not have been stuck on the wrong side of the trade.

"It is urgent that we introduce additional safeguards as well as strengthen oversight of our fractured markets to restore investor confidence," said Senator Carl Levin, who along with fellow Democratic Senator Jack Reed, will chair Wednesday's hearing.

The SEC, which in 2009 had already started reviewing and pondering new rules for the marketplace, was forced prematurely into action and adopted temporary measures to give single stocks a reprieve if it was falling uncontrollably.

It tried to clarify when and at what prices exchange operators such as NYSE Euronext would have to cancel erroneous trades. It also eliminated so-called stub quotes, or quotes priced well off the public price of a stock.

Bigger changes are in the works.

The SEC and the CFTC are under pressure to beef up their oversight of high-frequency trading, where banks and some hedge funds use computer-driven algorithms to rapidly create and execute trades.

Financial markets are "now susceptible to market dysfunctions and trading abuses that could jeopardize their stability and investor confidence," Levin said in a statement.

DERIVATIVES EXEMPTIONS

The SEC and CFTC are also under pressure to craft rules for the near $600 trillion over-the-counter derivatives market as required by the Dodd-Frank legislation.

The regulators have proposed rules to mitigate conflicts of interests at the so-called clearinghouses, which are expected to reduce risk between the two parties to a private swap transaction.

They must also determine who will be required to set aside additional capital and margin in order to deal and trade in the previously unregulated derivatives market.

Potential new capital rules have frightened "end users" or the companies, municipalities and others who use the derivatives to hedge risk such as fluctuating interest rates.

"The top priority is to make sure that end users are exempt so that they can have access to that cash and put it work in the economy," said Ryan McKee, a senior director with the U.S. Chamber of Commerce, the biggest U.S. business lobby.

The Chamber, other business groups and big companies such as Caterpillar Inc and Duke Energy are part of an "end user" coalition fighting to make sure that they will not be hit with additional capital requirements.

The SEC and CFTC will hold a public meeting on Friday to listen to industry's concerns about capital and margin requirements.

On Thursday, the CFTC is expected to release its first draft of swap execution facilities — venues Congress designed to increase transparency for the trading of swaps.

This will most likely start to determine which businesses will be able to qualify as a swap execution facility and take part in the business of facilitating trades in the derivatives market.