May 6th Meltdown Trader Identified: Waddell & Reed

May 14, 2010 2:05pm by Barry Ritholtz

I have no idea if this is true but: Surprise!:

“A big mystery seller of futures contracts during the market meltdown last week was not a hedge fund or a high frequency trader as many have suspected, but money manager Waddell & Reed Financial Inc, according to a document obtained by Reuters.

Waddell sold on May 6 a large order of e-mini contracts during a 20-minute span in which U.S. equity markets plunged, briefly wiping out nearly $1 trillion in market capital, the internal document from CME Group Inc said.

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.”

The CME document shows that during the sell-off and subsequent rally, other active traders in e-minis included Jump Trading, Goldman Sachs, Interactive Brokers, JPMorgan Chase and Citadel Group.

During the 20-minute period, 842,514 contracts in e-minis were traded while Waddell from 2 p.m. to 3 p.m. traded its contracts, CME said. The CME document did not provide a break-out of Waddell’s trading during the crucial 20 minutes.

Note that e-minis are amongst the most liquid futures contracts in the world . . .

Waddell & Reed’s response can be found here

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Source:
Exclusive: Waddell is mystery trader in market plunge
Herbert Lash and Jonathan Spicer
Reuters May 14, 2010 12:26pm EDT
http://www.reuters.com/article/idUSTRE64D42W20100514

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