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||3.85%||3.94%|
|15 yr fixed||3.03%||3.04%|
|30 yr refi||3.93%||3.99%|
|15 yr refi||3.12%||3.13%|
Today's featured rates:
Guinness owner says inclusion of an LGBT group in this year's parade is reason to resume its sponsorship, though some gay rights groups are still protesting the parade's policies. More
House of Cards' season 3 starts with Frank Underwood trying to pass a bogus economic policy More
The Stratos Card is a new Bluetooth-connected device that wants to make all of your credit cards, debit cards, loyalty cards, and gift cards obsolete. More
Self-described 'Last of the Mohicans' is still fixing typewriters after 55 years. More
Last week, the House of Representatives passed a bill that would expand benefits offered by the college savings plans to include coverage of expenses like computers and Internet access, among other things. And there is bipartisan support for it in the Senate, too. More