In looking for possible causes for the mysterious May 6 "flash crash" decline in financial markets, some attention focused on large trading in futures. Commodity Futures Trading Commission Chairman Gary Gensler said that one market participant was heavily selling S&P futures contracts during the plunge. Reuters first reported that the investor was Waddell & Reed, citing documents prepared by CME Group Inc., the futures exchange's operator.
Waddell & Reed declined to say whether it was the trader cited. In a statement on the Ivy Funds Web site, the company said its flexible portfolios employed hedging strategies using "e-mini" S&P 500 Index future contracts on May 6 but calculates that its trading activity accounted for about 1% of the volume traded that day. "We believe that trades of the size we initiated normally are absorbed easily in the market," it said.
In his note Wednesday, Snowling said, "Although the fund may have taken a bearish position on the U.S. markets during the 'flash crash' on May 6 of this year, and that positioning is likely to soften the blow of the market sell-off, the fund is still down 5.3% since that date."
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