Futures Sale Spurred May 6 Panic as Traders Lost Faith in Data
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Declines in index futures convinced traders a “cataclysmic event” was pushing down equities on May 6, leading them to abandon the market and triggering the biggest crash in a quarter century, federal regulators found.
A trader’s routine attempt to hedge losses helped set off a chain of events that sent the Dow Jones Industrial Average down as much as 998.50 points, according to a 104-page report released yesterday. Two people with knowledge of the findings by the Securities and Exchange Commission and Commodity Futures Trading Commission identified the firm as Waddell & Reed Financial Inc., an Overland Park, Kansas-based mutual-fund company with about $68 billion in assets.