A seller of futures contracts during the May 6 market meltdown was money manager Waddell & Reed Financial Inc. (WDR), Reuters reports Friday, citing an internal document from futures exchange operator CME Group Inc. (CME).
Waddell sold that day a large order of "e-mini" contracts during a 20-minute span in which U.S. equity markets plummeted, briefly wiping out nearly $1 trillion in market capital, according to the document Reuters obtained. The contracts can act as a directional indicator for the underlying stock index.
Regulators and exchange officials quickly focused on Waddell's sale of 75,000 e-mini contracts, which the document said "superficially appeared to be anomalous activity."
Gary Gensler, chairman of the Commodity Futures Trading Commission, said in congressional testimony Tuesday that his agency had found one sale was responsible for about 9% of the volume in e-minis during the sell-off in U.S. markets. Gensler said there was no suggestion that the trader, which he didn't identify, did anything wrong in only entering orders to sell.
The CME document shows that during the sell-off and subsequent rally, other active traders in e-minis included Jump Trading, Goldman Sachs Group Inc. (GS), Interactive Brokers Group Inc. (IBKR), JPMorgan Chase & Co. (JPM) and Citadel Group.
Waddell, of Overland Park, Kan., didn't comment. The CFTC also declined to comment.
A CME spokesman, who declined to comment on the document, said the Chicago-based company never discusses customer activity.
"We found no evidence of improper trading activity or erroneous trades by CME Globex customers," said CME spokesman Allan Schoenberg.
Full story at http://www.reuters.com/article/idUSTRE64D42W20100514
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