UPDATE: Waddell & Reed Reveals Link To May 6 Market Move

Waddell & Reed Financial Inc. (WDR) said Friday that it had been "affected negatively" by the May 6 market gyration, commenting after a media report said the money manager was a subject of an ongoing probe by regulators.

The so-called "mystery trader" who sold a large number of S&P 500 e-mini contracts on May 6 was identified as Waddell by Reuters, though its activity is not seen by regulators to have triggered the wild swings in U.S. stock markets that day.

A Waddell spokesman declined to comment specifically on whether it was the e-mini trader noted by Commodity Futures Trading Commission Chairman Gary Gensler this week. He also said the company had not been contacted by regulators.

"We believe we were among more than 250 firms that traded the 'e-mini' security during the timeframe the market sold off," said the company in a statement.

Gensler said in congressional testimony this week 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.

He said there was no suggestion that the trader, which he didn't identify, did anything wrong in only entering orders to sell.

The CFTC and the Securities and Exchange Commission are due to report their preliminary findings on the events of May 6 on Monday.

Waddell & Reed said that CME Group Inc. (CME)--the host exchange for e-minis--and the CFTC viewed the company as a "bona fide hedger" which wasn't seeking to "disrupt the markets", and which had dealt on a similar scale in the past.

"Like many market participants, Waddell & Reed was affected negatively by the market activity of May 6," it said.

Waddell & Reed shares were recently down 5.3% at $32.25.

Reuters reported that 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."

CFTC declined to comment and 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.

-By Doug Cameron, Dow Jones Newswires; 312-750-4135; doug.cameron@dowjones.com

(Sarah N. Lynch and Kristen McNamara contributed to this article.)

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