NEW YORK (CNNMoney.com) -- Investment firm Waddell & Reed responded Friday to a media report that it placed a large sell order for certain stock futures that regulators believe may have contributed to last week's brief-but-historic stock market crash.
In what has come to be known as the flash crash, the Dow Jones industrial average plunged 1,000 points -- the biggest intra-day trading drop ever -- on May 6, briefly erasing $1 trillion in market value, before regaining much of the lost ground.
While the ultimate cause of the collapse remains unknown, regulators have focused their investigation on a sharp drop in the value of a stock future called the E-mini S&P 500, which investors use to bet on the future performance of stocks in the broad stock index.
Waddell, an asset management and financial planning company based in Overland Park, Kan., sold a large order of E-mini futures contracts during a 20-minute span that corresponded with the plunge, according to a document obtained by Reuters.
In a statement, Waddell said it was one of possibly 250 other investors trading the E-mini futures contract on the day in question.
"On May 6, as on many trading days, Waddell & Reed executed several trading strategies, including index futures contracts, as part of the normal operation of our flexible portfolio funds," the firm said in a statement.
Waddell added that such trades are used to protect investors from potential losses, adding that the firm is a "'bona fide hedger' and not someone intending to disrupt the markets."
"This is a longstanding and well-monitored practice in certain of our investment portfolios," said Waddell.
Waddell (WAD) shares fell 5% to $32.38 Friday.
Gary Gensler, chairman of the Commodity Futures Trading Commission, said in congressional testimony Tuesday that regulators were focusing on one particular trader in the market for E-mini futures as part of the commission's investigation into the flash crash.
Gensler said the trader in question entered the market at around 2:32 p.m. ET on May 6 and finished trading by around 2:51 p.m. ET. He said this trader and others had executed hedging strategies of similar size previously.
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||3.49%||3.47%|
|15 yr fixed||2.69%||2.70%|
|30 yr refi||3.49%||3.49%|
|15 yr refi||2.72%||2.72%|
Today's featured rates:
Wells Fargo's vast network of branches hasn't buckled much in recent years. But that may not change, experts say. More
Passes for the new National Museum of African-American History and Culture in Washington D.C. are 'sold out' through March 2017. More
A number of popular websites were down for some users on Friday in what appears to be a massive DDoS attack. More
In 1998, Ntsiki Biyela won a scholarship to study wine making. Now she's about to launch her own brand. More
The University of Illinois partnered with Coursera to launch one of the most affordable online MBA programs yet. More