Regulators have concluded that a single trade by Waddell & Reed Financial helped spark a cascade of market selling on May 6.  Apparently,Waddell & Reed's trading of S&P 500 Index futures spooked traders that day, turning an orderly selloff into a crash that erased $862 billion from the value of American equities in less than 20 minutes. 

Waddell & Reed was selling E-mini futures as part of a normal hedging strategy, according to the SEC/CFTC joint report, dated 9/30.   The report will be presented to the Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues.  The report notes the firm didn't attempt to do anything nefarious, and its actions may not have prompted a retreat had there not been other concerns in the market, such as the European debt crisis.

Waddell, which sold a large order of e-mini futures contracts during the plunge, will not be named in the report, but instead, the report describes Waddell’s trade as a single trade by an entity.  CFTC Chairman Gary Gensler had previously alluded to that trade in congressional testimony.

    About E-mini S&P 500 Futures.    They are the largest contract by volume traded on the Chicago Mercantile Exchange, owned by CME Group.  CEO Craig Donohue said on June 22 that volume in the June E-mini S&P 500 futures on May 6 was 5.7mn contracts - about 1.6mn, or 28%, of those contracts were traded between 2 and 3 pm ET.   [NYT Dealbook, 10/1; Bloomberg, 9/30]