Money manager Waddell & Reed Financial Inc. was one of the biggest seller of futures contracts during the market meltdown last week, selling 75,000 e-mini contracts during the 20-minute U.S. stock market plunge, Reuters reported, citing a Chicago Mercantile Exchange (CME) document.
E-minis are one of the most liquid futures contracts in the world and can act as a directional indicator for the underlying stock index, according to Reuters.
Gary Gensler, the chairman of the Commodity Futures Trading Commission, testified before Congress Tuesday that one sale was responsible for approximately 9 percent of the volume in e-minis during the sell-off. Gensler said there was no indication the unidentified trader acted improperly and said the trades appeared to be a legitimate hedging strategy, Reuters reported.
A trader whose firm is active in the S&P 500 futures market told the news service that an order the size of the Waddell contract would have been a big trade on a normal day, “But when suddenly the market changes and there’s not as many bids there to trade with, 75,000 is going to cause quite a shock to the market,” the trader said.