Dow Crash 'Mystery Trader' Said Identified

Confusion, confusion. There's still no definitive news on what was behind the 1,000 point move in the Dow during a 20 minute period on May 6th.

Although US regulator The Securities and Exchange Commission (SEC) has said it believes that no single event was probably behind what has been described as a 'mysterious market plunge', The New York Times has reported that regulators are 'looking closely at heavy selling in the market for stock-index futures by a single trader, who accounted for around 9% of the trading volume on the 500 e-mini futures contract' in the period under review. 

And Reuters has now reported that the trader concerned didn't work in a hedge fund or for a high-frequency trading firm (as many suspected), but, according to a document the news agency claims to have seen from Chicago Mercantile Exchange parent CME Group Inc., rather US money manager Waddell & Reed Financial. The firm is said to have sold 75,000 e-minis during a 20-minute period on May 6th, but there is no suggestion that the individual trader concerned (who has not been identified) did anything wrong, as the trades are thought to have been part of a legitimate hedging strategy.

Reuters quotes one unnamed trader, who said: 'To get rid of 75,000 contracts, that's a lot of trading even if the market is healthy. 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'.

It seems that the actions of the trader may have led to what the SEC is speculating was a 'confluence of events' which, taken together, exacerbated what already had been a down day, and led to an extraordinary steep price drop and recovery'.

The SEC's probe into the matter, however, is ongoing, although it has confirmed that 'at this time, we have not identified any information consistent with computer hacker or terrorist activity'.

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