(Bloomberg) The U.S. Securities and Exchange Commission has spent 15 years remaking the stock market into 11 competing exchanges and hundreds of computer-driven traders. In the process it has virtually eliminated the traditional market makers who bought and sold stocks when no one else would.

Now the SEC is concerned the revolution has gone too far, leaving markets vulnerable when selling starts to snowball. Chairman Mary Schapiro called on the agency last week to examine whether the loss of "old specialist obligations" has hurt investors after measures such as trading stocks in penny increments cut the number of those firms on the New York Stock Exchange to 5 from 25 in 2000. With market making now dominated by hundreds of automated traders with few rules for when they must buy and sell, the SEC will consider ways to keep the biggest from abandoning the market at the first sign of trouble.

The debate over how to keep U.S. stock prices from plunging in times of stress gained urgency after the May 6 crash that erased $862 billion in equity value over 20 minutes. Lawmakers have asked if the high-frequency firms that have supplanted specialists and market makers with strategies that transact thousands of shares a second destabilized trading by stepping away when they were needed most.

"In the old days, the specialist obligation was quite stringent," said Patrick Healy, a former trading executive at Bear Stearns Cos. who now runs Chevy Chase, Md.-based Issuer Advisory Group LLC. "If he didn't meet it, he got canned, and someone else traded the stock. In the move to electronic trading, NYSE and Nasdaq emphasized speed, more technology and less of a role for humans."

A joint report by the SEC and Commodity Futures Trading Commission said a "severe mismatch of liquidity" possibly worsened by the withdrawal of orders from electronic market makers may have contributed to the May 6 crash, in which the Dow Jones Industrial Average fell 9.2 percent before recovering. A follow-up to the May 18 study is expected this month.

"The players in our markets have changed but our regulations have not kept pace," Senator Charles Schumer wrote in a letter to Schapiro last month. "High-frequency traders pulled out during the freefall, leaving a dearth of liquidity and exacerbating market volatility." The New York Democrat urged the SEC to impose obligations on high-frequency trading firms and give them incentives to become market makers.

Vanguard Group Inc., the biggest U.S. manager of stock and bond mutual funds, told the SEC in April that regulatory changes and efficiencies produced by high-frequency firms reduced costs for long-term investors by about 0.5 percentage point over the last decade. It cited increased liquidity and shrinking spreads between the best bid and offer prices.

A mutual fund returning 9 percent annually whose entire stock holdings are sold and replaced within a year would see the gain cut to 8 percent without the savings, according to Valley Forge, Pa.-based Vanguard, which oversees almost $1.4 trillion and offers more than 160 funds to U.S. investors.

Schapiro is trying to protect investors in a fragmented U.S. stock market fostered by the SEC while maintaining liquidity on exchanges dominated by firms that profit from computerized trading. Chicago-based Getco LLC, the high- frequency firm founded in 1999, purchased rights in February to oversee NYSE trading in 350 stocks as a so-called designated market maker. A month earlier, 86-year-old LaBranche & Co., the largest specialist firm in 2008, exited the business, saying it would seek higher profits elsewhere.

Specialists at the NYSE maintained "fair and orderly" markets by stepping in themselves when buyers and sellers weren't available. Similar to market makers on the Nasdaq, they took risks in return for the ability to see supply and demand for stocks and profit from the difference between the bid and offer prices. Both businesses suffered when exchanges started pricing stocks in penny increments in 2001, squeezing profit out of the bid-ask spread.

The SEC is in the "early stages of thinking about whether obligations on market makers akin to what used to exist might make sense," Schapiro told reporters on Sept. 7. The issue is "whether the firms that effectively act as market makers during normal times should have any obligation to support the market in reasonable ways in tough times," she said during a speech in New York the same day.