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UK "Flash Crasher" Refuses To Be Broken Market Scapegoat, Will Fight Extradition Request Facing Decades In Prison
While we eagerly await for the SEC to retract its official 104 page report summarizing the "Findings regarding the market events of May 6, 2010" in light of "recent developments", and as we follow the shift in the official narrative to the outright bizarre, in which the entire Flash Crash is now blamed on just one man (as opposed to just Waddell & Reed as per the previous narrative), we learn that the latest scapegoat for a broken, fragmented and manipulated market, Navinder Sarao, is not quite so eager to go to minimum security prison in the US for doing what leads to a slap on the wrist when someone like Citadel or Virtu does it, and will challenge the CFTC's attempt to pin everything on him.
Bloomberg reports that Sarao, 36, was in London court earlier today following his after by British police for being charged in Chicago with 22 criminal counts including fraud and market manipulation and said he will fight an extradition request by U.S. prosecutors over his role in the 2010 flash crash.
As previoisly reported, Sarao engaged in what every other HFT firms on a daily basis: namely spoofing. However, because he is a foreigner, he was easy prey for the US "justice" system, and as a result it is he that has been picked as a scapegoat (perhaps because the official investigation into Virtu, Citadel and the other HFT firms revealed something so dramatic it needed an easy and available cover up).
In the US he faces up to several decades in prison: wire fraud is punishable in the U.S. by a maximum prison term of 20 years, commodities fraud by a sentence of as long as 25 years, and commodities manipulation and spoofing by terms of as long as 10 years, or a $1 million fine.
The strategy “virtually ensured” that his orders wouldn’t be filled, and Sarao almost always canceled his bids without executing them, the Justice Department complaint said.
CME, which runs the exchange where his trades took place, declined to comment Tuesday on the situation.
What are they going to say: "everyone else does it but please keep quiet", or that Sarao singlehandedly managed to smash the E-mini bidstack which also included every central bank on the bid side, because recall we now know that "Central Banks Trade S&P500 Futures."
So yeah, one single Brit managed to overpower every central bank on the bid side and crash the market.
And he did it all from here: quite literally his basement, perhaps while wearing pyjamas.
See if you can spot the massive array of microwave towers, fiber optic cables and laser transceivers next to his trading fortress.
Incidentally, those curious, here is his "188/289" block algo in action - it was observed years ago by Nanex. Apparently the combined SEC, CFTC, and DOJ did not have enough man and processing power to figure out what one single man did years ago.
Sarao's algo, now with Nanex tick chart goodness! HiRez: http://t.co/5JtyvhNsEC pic.twitter.com/afyLqoFzJB
— rockhowse (@rockhowse) April 21, 2015
A close look at Sarao's #HFT spoofing algo placing/canceling orders in the eMini on flash crash day: pic.twitter.com/pmivURnwbI
— Eric Scott Hunsader (@nanexllc) April 21, 2015
Finally, since this ridiculous story will be around for a while, here is some further detail on the so-called Flash Crasher from Bloomberg.
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Manipulation is only a crime if it causes the market to go DOWN.
Unless you're talking about the Gold market.
Don'T forget silver.
That naked 8 billion ounce paper short a few years ago is what did it.
I'm all in palladium. It's the future.
It's easier to get by the border guards.
We're all Flash Crashers now.
I don't think this guy is gonna roll over too easy. Heh.
In 2010 he was contacted again by the company he traded through in Chicago because 'it looks like he's deleting a huge amount of orders a second', an investigator said.
Sarao then responded and said he would 'like to apologise for any inconvenience caused by this' and added he 'was just showing a friend of mine what occurs on the bid side of the market almost 24 hours a day, by the high frequency geeks'.
The 36-year-old then pointed the finger at another trader and said: 'I see he continues to do this all day every day, yet you have a problem when I showed someone it for 5 mins?'
It emerged that the 36-year-old told CME Group Inc to 'kiss my ass' when they contacted him on the day of the 'flash crash' to remind him that all orders must be 'bona fide transactions'.
http://www.dailymail.co.uk/news/article-3049633/Trader-helped-trigger-50...
Remind me - how many people at Waddall & Reed went to jail?
He should try his own case in the public realm. Just put all the data out there, the more closed the proceedings are the less of a chance he has to survive.
OMG!! ONE GUY!!!! did all that!?!
ROTFLMAO
Your honor, I'd like to call NANEX to the stand
I, for one, am glad they caught the one guy who has prevented us from having truly free and fair markets low these last 6 years. I consider this era to now be finished and closed. A new era of market renaissance is upon us.
Well if they do haul his pathetic ass into court, I hope he does the smart thing. During "discovery" he publishes the names and the trades of EVERY player during the crash.
Discovery is a two way street.
Yes this a huge relief...god bless our justice seeking law enforecment, just so that we can live safe & secure in the warm bosom of our glorious overlords.
Hey Croesus. How you doing. So you noticed that too. Jersey shore is still a mess. Don't believe the lies.
Well they won't insure low lying land against storms anymore, (climate change and all), so if you want to rebuild, just do it on your own dime and prepare for the next storm.
Or, manipulation is only a crime if a chosen lost......some chosen must have lost here big time.
I freelance over th? internet and earn about 80-85$ an hour. I was without a job for 7 months but last month my paycheck with big fat bonus was $15000 just working on my computer from my home for 5-6 hours. Here's what i have been doing... www.globe-report.com
Cheetos on the keyboard too
The real stupid money isn't in drilling for oil it's in financial investments of any kind including gold and silver.
Navin, the new phone books are out .... and you're in it !
Flash crasher gets prosecuted? Corzine, Bush, Bernanke, Yellen and Obama don't get shit. WTF
You gotta be willing to suck the Rothschild dick if you want to get away with illegal activities. This guy refused to suck and swallow the Rothschild juice, in which case he is a criminal.
How about he requests trading records for with week of March 6th 2008 from all exchanges with originating firms names on them....that'd be where all the fun begins.
Didn't this happen the day before Goldman was to testify before a senate hearing?
He can now calmy say that I have provided liquidity
Thank you for using a spell checker. Unfortunately you still need to proofread before publishing if you want to maintain any credibility. This type of careless error calls into question how much time you spent checking your facts:
"following his after by British police"
too bad his name isn't cohen or corzine or clinton
I asked Bill to say a few words.
He stuck me with a bill for 100K.
Or -berg, -witz, -stein, fink, gold-, silver-, green-, bernanke, well you get the idea.
The difference between what he did and what Citadel and Virtu do is he manipulated the market down. Citadel and Virtu manipulate it up. One gets rewarded, one gets punished.
Sararo should be employed by Goldman, he's such a genius.
Working on his own...
In his basement...
In his pyjamas..
Genius, I tell you.
DavidC
sergey stole software that could be used to manipulate "the market" from the squid (they said this in a public statement). he went to jail. the squid kept using the market manipulating software. that's justice in america.
Wow!!! So this guy had a dozen servers and an 'Express Direct' line connected to NYSE out of his four bedroom house? He must have made billions. </s>
Oh, this GOY is going to pay, and if he still thinks Britain is a different nation with it's own set of rules to protect him then he's not as smart as he sounds. Laws are for GOYIM, doesn't matter where they live, they are accountable to the borderless JWO.
yep. if he were a joo he could have done 9/11 for the insurance money and gotten away with it.
.
If you are a dark skinned man, you better not play the white man's "game".
What about the front running algo's that actually sold the market based on his sell orders higher up in the book? I mean that's basically what he was manipulating right? Shows some size to sell and gets frontran. So the CME wants all our orders to be legit so the frontrunners can only front run legitamite orders? LOL
this confirms my suspicion why markets can only go higher. HFTs can't front run a down market or they go to jail.
wow someone bigger than a whale and way to big to suffer any loss is still butt hurt about 2010 flash crash....they must have lost a big chunk.
seeking clarity here...so can I have a sell order and a buy order at the same time for the same security or not?
Buy orders are fine, however you will be arrested if you try to sell anything
thx - thought so but in order for me to buy something I have to sell
It's called margin. Dig deeper.
Most houses in the UK don't have 'basements'
The little guy always takes the fall.
Solution is simple, outlaw computer trading.
You want to buy and sell stocks, fine. Do it manually. Enter your bids as if it were EBay.
Simple fix and let this guy go. His crime is miniscule compared to Congress's and DC crimes.
Rick Santelli had a better idea. Charge a tax or fee for cancellations.
I have one better, charge a fee or tax for every transaction, completed or not. The HFT firms would then have to figure out whether their manipulations are worth the cost.
After googling around I realize that this article is complete garbage. Why didn't you mention the connection to MF Global? Could it be that you are just regurgitating a single news story? ZH has some excellent articles but stuff like this erodes your credibility.
Post it up. It would enhance YOUR credibility and do the board members here a service.
If Obama or Clinton won't pardon this guy, I'm sure Rubio will if the price is right.
Who was this guy's broker? i guess they didn't notice his order patterns. BS. The broker is as guilty as this poor slob.
Why not just change the margin rules such that you cannot place more orders than your portfolio leverage limit? Even at 100:1 for futures, he probably wouldn't have had enough equity to place all these orders.
this guy should fight extradition, and these charges that are being sought against him.
if blankfein, dimon, bernanke, yellen, draghi, greenspan, bank of japan, kevin henry, etc can all manipulate ''markets'' every fucking day for years and years without having anything done to them, why should this guy be different?
if manipulating ''markets'' is a crime, arrest the fucking right people, not this guy who is just a scapegoat for these criminals.
First London Whale, then London Goat, zookeeper jobs to require advanced math & computer science degrees.
Clearly this guy is a criminal mastermind, he made so much money when he engineered the flash crash that he still lives in his parents basement.
"Eric Scott Hunsader @nanexllc 12m12 minutes ago
Between 13:30 & 14:42:12, Sarao's algo placed/canceled sell orders for 600 contracts 12,077 times: ~3 times PER SECOND"
Yet those that do many multiples of that everyday are perfectly legit??????
This guy only got caught because attention was focused on the flash crash itself. If the practices are illegal, all he has to do is request trading records for almost any 6 trading days where the Dow reversed more than 200 points and you will find plenty of others doing the same thing.
I think you will find Hilldaberry unintentionally wiped those records when she 'tidied up' her email server.
as it turns out there was only one spoofer in the whole world. lulz
D'up , just as it was the shoeshine boys pretending to be pizza delivery boys in their sub- prime mortgage applications that caused all the furor, leading to the crash. Bastards!
These guys can't tell a cupola from shinola.
Zero dark thirty 2... "the hunt for Sarao"
Fucking Jews want a sacrificial lamb to take the focus off them. This asshole is no Jesus but he knows they'll crucify him if they can get him extradited.
I actually feel sorry for this guy. His legal costs are going to be massive to fight this. If there is going to be any silver lining I hope that in court all "big financial company" malpractices are also exposed ... and the defence concentrates on him being scapegoated.
The process is the punishment.
The CFTC doesn't want to take this to trial that's why they're already parroting...
"In the US he faces up to several decades in prison: wire fraud is punishable in the U.S. by a maximum prison term of 20 years, commodities fraud by a sentence of as long as 25 years, and commodities manipulation and spoofing by terms of as long as 10 years, or a $1 million fine."
Why would the CFTC dust off a file from 2010 that's long been forgotten.
Yes, "Discovery" is the key phrase.
"Eric Scott Hunsader @nanexllc 6m6 minutes ago
On May 6, 2010, Sarao's algo started at 10:20:00 ET and turned off at 14:40:12. The flash crash ignition point was at 14:42:44"
In the Archaic world of pit trading, showing a bid/offer outside of the current BBO is actually illegal. However in the electronic market place, the exchanges charge a premium for real time depth data. This is where “spoofing” lives and breathes. The HFT traders will argue that what they are doing is NOT illegal because they are placing tradable orders. This to some extent is true however what is rarely discussed is how the exchange matches orders electronically.
As an example let’s say that I am a pit trader and I want to buy on my bid. To influence fellow traders I show an offset market offering a large quantity while bidding for a small quantity. My thought is that loading the offer will fool the market that I am an interested seller when actually my interest is to buy. Great idea right up to the point when the trader next to me says “buy them all.”
Electronically I can do the same thing without the risk. I can place an order to buy 1000 on an iceberg 10 lot clip (meaning that the market only sees 10 at a time and my bid is immediately replaced after every fill) – and place 100 different 10 lot offers at the same price (meaning the market sees 1000). This looks like the pit scenario, however, because of the exchange matching algorithm, it is very different. If another trader lifts my 1000 lot offer he will not get them. This is why …
The Exchange matches and reports trades sequentially. My algo will simply “cancel all” as soon as I sell my first 10 lot. Another detail to note is that I as the seller(or buyer) gets the trade confirm before the public sees it. This happens all day – everyday – in every product. This is not just one trader in London trading from his basement in pajamas…
In conclusion this problem can be solved at the exchange level in one microsecond by changing the matching algo from sequential to block. So why have they not made the change? Simple – money. If they make the change – the game is over. Advertised liquidity drops. Volume goes through the floor. And their stock price drops.
The crystal ball says that this change will not happen. Volumes will continue to increase. Spoofing will remain and grow. Exchange stock prices will go up. Violent moves will occur when the algos chase each other. Government regulators will keep their jobs vilifying and fining the little fish in the pond. And real market participants will lose …
Excellent CPT, thanks for that.
I imagine it would be quite enlightening to have a couple of drinks with you and get a glimpse of the belly of the beast.
Furthermore, maintaining the illusion of liquidity which is not actually there is extremely dangerous.
Chicago Pit Trader,
6 paragraphs worth reading in the 15 minutes I allocated for ZH this morning.
I owe you a whisky.
HLS
Thanks for the clear concise explanation of how this works.
As usual, they catch the little guys and crucify them to make it look as if they are doing something about the rampant corruption going on in today's financial system, and the big fish continue to thieve.
He'll eventually swan dive off the peak of that house.
As I've said repeatedly, adding a short random delay to each transaction renders all HFC algos impotent. Poof. The problem goes away. Could it be more clear that they "don't" want the problem to go away?
Wow, this dumbass will never stop spouting his bullshit.
FUCK YOU FLASHBOYS!
since it took them years.. why not open another account and do it again for legal fees
YOU ARE THE LONE WOLF GOY SACRIFICE!
MAN UP!
Wow, I totally misread Michael Lewis' book...I thought a bunch of people and organizations were to blame. Very glad to learn is was just one brown man in England.
I vote Eric Hunsader for president! <3 his contributions to this space. where would we be without that data
Tit-for-tat
BOE-Berkshite Half-way House-TBTF Thingy
Conclusion: Everyone else involved in the flash crash was politically connected.
Asians were looted by the colonial Europeans.
Europeans had looted their treasuries and shipped all their gold, silver diamonds & pearls.
We Asians would like to pay back .