Tuesday, October 12, 2010

Kansas Mutual Fund Caused "Flash Crash"

1st NW Quadrant:The Approval Matrix

From The New York Times by By NELSON D. SCHWARTZ

Futures trades by Waddell & Reed, a conservative 70-year-old mutual fund based in Overland Park, Kan., have been linked to the plunge, during which the Dow dropped hundreds of points in a matter of minutes.

The company was identified in a Chicago Mercantile Exchange document, according to Reuters. In a statement, Waddell & Reed said it was among the firms that traded the stock index futures contract suspected of being a crucial link in the cascade of events leading up to the plunge

“On May 6, as on many trading days, Waddell & Reed executed several trading strategies, including index futures contracts, as part of the normal operation of our flexible portfolio funds,” the firm said. “Like many market participants, Waddell & Reed was affected negatively by the market activity of May 6.”

[However,] while confirming trading activity that day, Waddell & Reed insisted it was not responsible for setting off the market break or doing anything out of the ordinary. Waddell & Reed said it was among 250 firms that traded the e-mini during the critical minutes.

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