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Report to say Waddell stoked flash crash: source

By Rachelle Younglai and Jonathan Spicer

WASHINGTON/NEW YORK (Reuters) - A single trade by Waddell & Reed Financial Inc helped spark the cascade of market selling on May 6, said a source familiar with regulators' report on the so-called flash crash.

Waddell, which sold a large order of e-mini futures contracts during the plunge, will not be named in the report, according to the source, who requested anonymity because report has not been made public.

But the report will describe Waddell's trade as a single trade by an entity, the source said.

The May 6 crash sent the Dow Jones industrial average down some 700 points in a matter of minutes before sharply recovering -- an unprecedented breakdown that exposed deep flaws in the electronic marketplace now dominated by high-frequency trading.

Citing an internal exchange document, Reuters on May 14 reported that Waddell & Reed sold a large order of e-minis during the plunge -- identifying the firm that CFTC Chairman Gary Gensler had previously alluded to in congressional testimony.

The Securities and Exchange Commission and Commodity Futures Trading Commission had been expected to release the much anticipated report before October.

But the report must win approval from the majority of the 10 SEC and CFTC commissioners. It is not clear whether all commissioners have had a chance to review the report with two of the SEC commissioners traveling.

Also the CFTC must clear some procedural hurdles so that they are allowed to release information about an investigation.

Top Democratic lawmakers will ask the SEC and CFTC for a copy of the report so that Congress can publicize the findings, a second source familiar with the matter said.

Senate Banking Committee Chairman Christopher Dodd and House Financial Services Committee Chairman Barney Frank will send such letters to the SEC and the CFTC later on Thursday, the source said.

(Editing by Gary Hill)

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