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'Flash Crash' Trader Navinder Sarao Faces US Extradition
mrspoonsi writes with this excerpt from the BBC: Navinder Sarao, the trader accused of helping to trigger the U.S. "flash crash," can be extradited to face trial, a court has ruled. Mr Sarao traded on the Chicago Mercantile Exchange from his parents' home near Heathrow Airport in London. Mr Sarao, 37, is accused of contributing to events on 6 May 2010, when the Dow Jones share index briefly fell more than 1,000 points. The flash crash on 6 May 2010 temporarily wiped nearly $1 trillion off the value of shares. US authorities want Mr Sarao to stand trial on 22 criminal counts. They allege he is guilty of "spoofing" — the practice of placing large orders that manipulate the markets and then cancelling or changing them, allowing him to buy or sell at a profit. Mr Sarao's spoofing netted him a profit of $40m (£28m), they argue. The charges that Mr Sarao faces carry sentences totalling a maximum of 380 years.
Reader whoever57 links to a similar report at the New York Times, which notes "This is not the last step for Mr. Sarao, as the extradition must next be reviewed by the Home Secretary." "As the submitter," writes whoever57, "it's not clear to me how this man did anything different from the high-speed and algorithmic traders do every day."
"the practice of placing large orders that manipulate the markets and then cancelling or changing them"
If the market systems allow this behaviour then it is a problem with the system. Whether he is guilty of a crime or not is a separate issue (just because you CAN do something doesn't mean it is legal), but if the system allows it to happen then the system needs to tightened down to stop it.
Unless of course those the exploit it regularly with impunity don't want it closed...
Exchange rules won't let your lower bids fill before your highest bid. You're also going to be competing with other participants for the same trade. So pretty much you're imagining a game with completely arbitrary rules leaned in your favor, while for the most part everyone is playing by the same rules.
No they don't, high frequency traders stay within the trading rules and don't spoof/make fake transactions. They merely exploit the advantage of being able to react to the market faster. They are still scum, but there goal is not to manipulate the market to make their gains like the piece of shit in this article.
Outright illegal? Not in the UK it is not, and that is the main problem with this.
The hell it is.
The computerised SYSTEMS themselves are what should be illegal.
He just played them at their own game and made money because those idiots and their crap algorithms are twitchy and jump on bandwagons too easily.
It most certainly is not illegal in the UK. Piss off America.
The only reason he is being attacked by this extradition case is some rich bankers lost out and they want blood.
No it isn't how HFT make money. HFT have the same restrictions about spoofing, they make their money by simply being in a position to react to changes in the market much faster (think Milliseconds) than the rest of the market.
Milliseconds? Where are you? 1995? In a millisecond light travels 186 miles. Those high frequency traders rely on their trading systems being co-located in the same data center as the exchange systems (for which the exchange gets big bucks in rent). Every foot of distance adds a nanosecond to the trading time delay. They could save considerable money siting their trading computers half a mile away, but that would add 2.5 microseconds to the trade add knock them out of the running entirely. Those guys are playing against other high speed traders and the advantage they are seeking is measured in nanoseconds.
Since the exchanges make the rules (legal restrictions are far more lax) they are in the game of authorizing cheating, and collecting a cut of the take.
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