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
-Dow Jones Newswires; 212-416-2900