OVERLAND PARK, Kansas (
) -- The latest media report claiming it has solved the mystery of the ''flash crash'' surfaced on Friday.
reported on Friday afternoon that it had internal documents from the
, the largest futures and options exchange, showing that money manager
Waddell & Reed Financial
was involved in the trade that led to a massive selloff in the market, with the Dow at one point falling almost 1,000 points.
Shares of Overland Park, Kan.-based Waddell & Reed were lower Friday afternoon, more than the financial sector's average decline. Waddell was down 5% on heavy volume, with 3 million shares trading, well above the average of 800,000 shares daily.
Earlier this week,
The Wall Street Journal
reported that a quant hedge fund, Universa Investments, could have been behind the mystery trade.
quoted the document as saying that on May 6. Waddell sold a large order of e-mini contracts -- one of the most liquid
futures contracts -- in a span of 20 minutes. During that time, 842,514 e-mini contracts were traded. It was not clear how many of the 75,000 contracts quoted in the CME documents were sold by Waddell & Reed in the 20-minute meltdown,
In congressional testimony last Tuesday, Gary Gensler, chairman of the Commodity Futures Trading Commission, noted that one sale was responsible for about 9% of the volume in e-mini contracts during the selloff.
Waddell & Reed put out a statement saying the report was much ado about ordinary trading business: "Like many market participants, Waddell & Reed was affected negatively by the market activity of May 6."
Waddell & Reed said in its statement that it often uses futures trading to "protect fund investors from downside risk," and on May 6 it executed several trading strategies including the use of index futures contracts as part of the normal operations of its flexible portfolio funds.
Waddell & Reed said it believes it was "among more than 250 firms" that traded e-minis during the market selloff.
reported that the CME Group declined to comment on the internal documents, citing customer protection and said that e-mini contracts functioned efficiently in the market on May 6 and did not precipitate the collapse.
-Reported by Eric Rosenbaum in New York.
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