'Mystery Trader' in Stock Plunge ID'd

By TOM LAURICELLA
WSJ

As regulators struggle to forge a clear picture of the events that led to the stock market's slide on May 6, another piece of the puzzle has come together.

Waddell & Reed Financial Inc., an Overland Park, Kan., brokerage and mutual-fund firm, was identified as the mystery trader that sold a large amount of futures contracts during the decline. Commodity Futures Trading Commission Chairman Gary Gensler, without identifying the firm, has cited the trading as one of many factors that contributed to the Dow Jones Industrial Average's nearly 1,000-point intraday decline.

Much of the focus in understanding the market break has been on superfast trading hedge funds and the inner workings of the stock market. Meanwhile, it is clear that investors of many stripes, from hedge funds to individuals, were selling heavy against a backdrop of the European debt crisis.

But in this case, it appears that some of the pressure on the futures market may have come from Waddell & Reed, albeit one using a somewhat untraditional strategy for mutual funds.

(More here.)