Waddell & Reed Claims Innocent Hedging

Saturday, May 15, 2010 0 Comments

(design whore)

Like the Citigroup trader who was originally blamed for the events of May 6th, Waddell & Reed (WDR) is countering claims that their trading set off the firestorm.

Said WDR via press release Friday:

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. Such trades often are executed in response to market activity, and are undertaken to protect fund investors from downside risk. We use futures trading as part of this strategy, broadly known as hedging. This is a longstanding and well monitored practice in certain of our investment portfolios. We believe we were among more than 250 firms that traded the “e-mini” security during the timeframe the market sold off.

Quotes attributed to executives at the CME and the CFTC note that Waddell & Reed has executed trades of this size previously, and indicate that we are a “bona fide hedger” and not someone intending to disrupt the markets. Further, CME noted that they identified no trading activity that contributed to the break in the equity market during this period. Like many market participants, Waddell & Reed was affected negatively by the market activity of May 6.
You hear that? It hurt them too. They were just doing their jobs. Perhaps we are going to need yet one more scapegoat to parade around and accuse?

See also: Blame the Market Plunge on Waddell & Reed Trader

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.