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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 $40m (£28m), they argue. The charges that Mr Sarao faces carry sentences totalling a maximum of 380 years.
Reader whoever57 links to a similar report at the New York Times, which notes "This is not the last step for Mr. Sarao, as the extradition must next be reviewed by the Home Secretary." "As the submitter," writes whoever57, "it's not clear to me how this man did anything different from the high-speed and algorithmic traders do every day."
Like anything that happens in the corrupt UK or US, the only thing Sarao is guilty of is not already being a wealthy insider. Algorithmic traders do this exact thing a trillion times every trading day. Banks did soo much worse.. and yet none of the banking executives are sitting in jail.
--- We need more Ron Paul!
> They allege he is guilty of "spoofing" — the practice of placing large orders that manipulate the markets and then cancelling or changing them
Isnt this standard practice now? Isnt that how most HFT makes money, and it's why retail investors are advised to never place market orders anymore.
That bid for 4.00$? Nah man, j/k. Cancelled. Here's one for 3.99$ though. ...
It's K? ROFL. Cancelled. How about 3.98$?
Still K? kekekekeke. Cancelled. I'll offer you 3.97$
Still K? huehuehue. Cancelled. 3.96.
3.84$. Oh? You wont sell for 3.84$? No prob bro. Here's an order for 3.85$ that I already know that you will take because I just cancelled the order that you tried to fill.
AND SOLD.
K. Now... place a bid for 4.00$ and lets see who's selling.
REPEAT.
"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...
Ah, yes, the one fellow who wiped away a trillion dollars of value. What do you call it when something loses a trillion dollars of value, solely due to the actions of the people who hold full ownership of the thing? A bubble.
It seems there's a small class of people from whom, if you shift value to yourself, will guarantee you become a criminal, even an international one. And another large class of people from whom, if you shift value to yourself, will guarantee wealth.
The 2008 mortgage-backed securities fiasco contrasted against this case is very telling. Where's the list of names of who went to prison in 2008-2009? From whom did they make most of their money?
fifth sigma, inc.
The lesson here is do not defraud the rich. They have the power of the government and the law to manipulate to their own benefit. You steal from the poor. You know, like the banks, investment houses, and the insurance companies did and continue to do to you and me. The government will even reward you for be so damn good at it!
How can real world value change by billions of dollars on a scale of milliseconds? The only real world events that can make that happen are nuclear weapons or meteor strikes. Even a massive earthquake lasts seconds, and huge storms take hours to days to do their damage.
High speed trading is a fictional construct because it creates a version of value that is decoupled from the real world. It is by definition a game that is only available to insiders. That's why incredible amounts of money are spent to build data centers as near as possible to trading hubs, since an advantage of milliseconds makes the difference between success and failure.
It is the opposite of a level playing field. It creates a system where there is a vast gap between insiders and everyone else. There is no free market capitalism with this kind of division of access.
For all the Libertards out there, being able to trade stock is not equivalent to high speed trading. High speed trading makes money on a millisecond scale. Trading outside that realm, even using computers is seconds behind which translates to trading in the past. First mover advantage is available only for the inside players. Free market capitalism doesn't really exist, it's just propaganda to keep the peasants from causing trouble.
Why is Snark Required?
Like anything that happens in the corrupt UK or US, the only thing Sarao is guilty of is not already being a wealthy insider. Algorithmic traders do this exact thing a trillion times every trading day. Banks did soo much worse.. and yet none of the banking executives are sitting in jail.
That's not what the guy did. What he did was place huge orders then cancel them to cheat on quick pricing fluctuations caused by his own fake transactions. This is not only dishonest, this is outright illegal, and it's not something legitimate investment banks do.
Let's not make every story about thieves and scammers a general complaint about the financial services industry otherwise actual issues will get lost in the noise.
lucm, indeed.
That's not what this article says. Only 3.2% of the orders placed in the stock martket actually go through. That was the second quarter of 2013, well after the 2010 flash crash. And on some exchanges a whopping 99.76% of orders is canceled.
Quote from that link: "High frequency trading firms have been known to flood the market with orders, trying to determine the price institutional or retail investors are offering, then cancel 90% of them a split-second later. This can artificially alter the price of a security, netting high-frequency traders profits at the expense of their counterparties."
There are orders types that are immediate-or-cancel. You send this order to the exchange and if it can not trade because there is no opposite order then it is automatically cancelled by the exchange. These orders are different from spoofing orders as immediate-or-cancel orders are not shown to the public unless they actually trade.
If these cancelations are counted, then this number is very logical, since when over a hundred traders want to trade for a certain price, only one of them will succeed.
Also other orders that are shown to the public but are not there for a good price won't trade for a long time, eventually those orders need to get another price (cancel the current order then create a new order on the new price).
There is a generic rule that at least european exchanges hold to: "Any order that you send to the market is intended to trade". If they find traders that do not follow this rule then the trader gets a warning, if the trader does not change they will get fines or be banned from the exchange. Many exchanged have rules a lot stronger than the laws in those countries, and exchange rules have a bigger bite as the exchange can more easily punish traders.