NEW YORK (Reuters) - A spine-chilling slide of nearly 1,000 points in the Dow Jones Industrial Average, its biggest intraday points drop ever, led to heightened calls for a crackdown on computer-driven high-frequency trading.

The slide, which in one 10-minute stretch knocked the index down nearly 700 points, may have been triggered by a trading error. Major stock indexes eventually recovered from their 9 percent drops to close down a little more than 3 percent.

But the follow-through selling that pushed stocks of some highly regarded companies into tailspins exacerbated concerns that regulators can quickly lose control of the markets in a world of algorithmic trading.

“The potential for giant high-speed computers to generate false trades and create market chaos reared its head again today,” Senator Edward Kaufman said in a statement.

“The battle of the algorithms -- not understood by nor even remotely transparent to the Securities and Exchange Commission -- simply must be carefully reviewed and placed within a meaningful regulatory framework soon.”

Kaufman and Senator Mark Warner -- both Democrats -- said Congress needs to investigate the causes of the market plunge, which at its deepest point wiped nearly $1 trillion off equity values.

Citigroup Inc C.N said it was investigating a rumor that one of its traders entered the trade, a spokesman for the bank said on Thursday. Citigroup, the third-largest U.S. bank, currently has no evidence that an erroneous trade has been made, the spokesman said.

‘SCREWED UP’

Earlier, sources told Reuters that the plunge in the Dow Jones Industrial average may have been caused by an erroneous trade entered by a person at a big Wall Street bank.

Market sources said the erroneous trade may have involved E-Mini contracts -- stock market index futures contracts that trade on the Chicago Mercantile Exchange’s Globex trading platform. The composition of the E-Mini is similar to the stocks in the S&P 500.

"I can confirm that our markets operated properly and there were no problems," a CME Group CME.O spokesman said.

Other market sources said the erroneous trading involved the IWD exchange-traded fund or the S&P 500 Mini. A person close to BlackRock BLK.N, which manages the IWD, said there was no unusual trading in the iShares product.

During the sell-off, Procter & Gamble shares plummeted nearly 37 percent to $39.37 at 2:47 p.m. ET (1847 GMT), prompting the company to investigate whether any erroneous trades had occurred. The shares are listed on the New York Stock Exchange, but the significantly lower share price was recorded on a different electronic trading venue.

“We don’t know what caused it,” said Procter & Gamble spokeswoman Jennifer Chelune. “We know that that was an electronic trade ... and we’re looking into it with Nasdaq and the other major electronic exchanges.”

A different P&G spokesman had said earlier the company contacted the Securities and Exchange Commission, but Chelune said that he spoke in error.

One NYSE employee leaving the Big Board’s headquarters in lower Manhattan said the P&G share plunge lay at the center of whatever happened.

“I’ll give you a tip,” the employee said, speaking on condition of anonymity. “P&G. Check out the low sale of the day. Something screwed up with the system. It traded down $30 at one point.”

WIDE SWINGS

Nasdaq said it was working with other major markets to review the market activity that occurred between 2:00 p.m. and 3:00 p.m., when the market plunge happened.

The exchange later said it was investigating potentially erroneous transactions involving multiple securities executed between 2:40 and 3:00 p.m.

Nasdaq also said participants should review their trading activity for potentially erroneous trades.

NYSE Euronext CEO Duncan Niederauer seized on the problems in an interview with CNBC to stress that the exchange was a safer place to trade because it deliberately slowed down market making when it realized there was something extraordinary happening.

The exchange has been in a battle over recent years with a series of upstart trading venues, many of which advertise either lower prices or faster transaction speeds.

The market plunge and especially wide swings in some individual stocks reignited some wider criticism of high-frequency trading, a strategy using lightning-fast computer programs to track market trends.

“We did not know what a stock was worth today, and that is a serious problem,” said Joe Saluzzi of Themis Trading in New Jersey, a frequent critic of computer-driven high frequency trading.

Investors had already been on edge throughout the trading day after the European Central Bank did not discuss the outright purchase of European sovereign debt as some hoped they would to calm markets.