New voter surge in early voting could sway battleground states in 2024 US presidential election    Civil Defense urges caution amid forecast of heavy rain to hit most Saudi regions until Monday    What's in it for FinTech startups in events like Biban24    Al Nassr and Al Hilal share points in intense Riyadh Derby draw    ImpaQ: Riyadh to host first Impact Makers Forum in December    Saudi Arabia ranks 12th globally in international visitor spending in 2023    SFDA chief discusses investment opportunities in food and pharmaceutical sectors with Chinese companies    Riyadh's Sports Boulevard receives Platinum ActiveScore certifications    Saudi Arabia refutes claims of rising worker fatalities, highlighting low work-related death rates    US says around 8,000 troops from North Korea are stationed in Russia's Kursk region    Spain mourns as death toll passes 150 in catastrophic floods    Seven killed in Israel in deadliest Hezbollah rocket strikes in months    Cyclists on phones face jail under Japan's new traffic laws    Hidden sugars in Asia's baby food spark concerns    Saleh Al Shehri strike seals Al Ittihad's Sea Derby win over Al Ahli    HONOR unveils pre-order of the stunning HONOR MagicBook Art 14 Featuring an ultra-slim design, HONOR Eye Comfort Display and AI Cross-OS WorkStation    Derby Week makes its debut in the Roshn Saudi League    Al Nassr eliminated from King's Cup after a defeat to Al Taawoun    Teri Garr, Young Frankenstein and Tootsie star, dies at 79    Indonesia Days event celebrates cultural diversity at Al Suwaidi Park    India puts blockbuster Pakistani film on hold    The Vikings and the Islamic world    Filipino pilgrim's incredible evolution from an enemy of Islam to its staunch advocate    Muted Eid celebrations for millions of Nigerian Muslims    Exotic Taif Roses Simulation Performed at Taif Rose Festival    Asian shares mixed Tuesday    Weather Forecast for Tuesday    Saudi Tourism Authority Participates in Arabian Travel Market Exhibition in Dubai    Minister of Industry Announces 50 Investment Opportunities Worth over SAR 96 Billion in Machinery, Equipment Sector    HRH Crown Prince Offers Condolences to Crown Prince of Kuwait on Death of Sheikh Fawaz Salman Abdullah Al-Ali Al-Malek Al-Sabah    HRH Crown Prince Congratulates Santiago Peña on Winning Presidential Election in Paraguay    SDAIA Launches 1st Phase of 'Elevate Program' to Train 1,000 Women on Data, AI    41 Saudi Citizens and 171 Others from Brotherly and Friendly Countries Arrive in Saudi Arabia from Sudan    Saudi Arabia Hosts 1st Meeting of Arab Authorities Controlling Medicines    General Directorate of Narcotics Control Foils Attempt to Smuggle over 5 Million Amphetamine Pills    NAVI Javelins Crowned as Champions of Women's Counter-Strike: Global Offensive (CS:GO) Competitions    Saudi Karate Team Wins Four Medals in World Youth League Championship    Third Edition of FIFA Forward Program Kicks off in Riyadh    Evacuated from Sudan, 187 Nationals from Several Countries Arrive in Jeddah    SPA Documents Thajjud Prayer at Prophet's Mosque in Madinah    SFDA Recommends to Test Blood Sugar at Home Two or Three Hours after Meals    SFDA Offers Various Recommendations for Safe Food Frying    SFDA Provides Five Tips for Using Home Blood Pressure Monitor    SFDA: Instant Soup Contains Large Amounts of Salt    Mawani: New shipping service to connect Jubail Commercial Port to 11 global ports    Custodian of the Two Holy Mosques Delivers Speech to Pilgrims, Citizens, Residents and Muslims around the World    Sheikh Al-Issa in Arafah's Sermon: Allaah Blessed You by Making It Easy for You to Carry out This Obligation. Thus, Ensure Following the Guidance of Your Prophet    Custodian of the Two Holy Mosques addresses citizens and all Muslims on the occasion of the Holy month of Ramadan    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.



Flash crash case arouses skepticism
Published in The Saudi Gazette on 02 - 05 - 2015

The floor of the New York Stock Exchange on May 6, 2010. If US authorities are correct, Navinder Singh Sarao, helped set off the “flash crash” that day, raising fears that it's not just big banks and hedge funds that can create chaos on exchanges and wipe out the savings of ordinary investors. — AP
Douwe Miedema
The notion that one man trading from his parents' house in a working class London suburb had a material role in the 2010 Wall Street flash crash has aroused increasing skepticism from investors and traders since charges were brought on Tuesday.
The US has asked UK authorities to hand over Navinder Singh Sarao, 36, after his arrest this week on charges that he manipulated markets over several years in a fraudulent scheme that helped cause the stock market rout.
The US Department of Justice alleges that Sarao used souped-up, off-the-shelf software to trick other market participants into thinking massive sell orders were about to hit, causing the so-called E-mini S&P futures prices to drop so he could buy at cheaper levels. In doing so, he made $40 million in profits, US authorities allege.
But traders doubt that Sarao could have had the upper hand in a market dominated by Wall Street firms with powerful computer trading programs and huge technology budgets. The charges against Sarao, operating far from the center of US markets and engaging in activity some believe occurs every day among larger firms, show that regulators may not shy away from publicity, even if their case may be legally solid.
Linking Sarao to the flash crash "smacks of sensationalism," said Manoj Narang, founder of Tradeworx, a firm that supplies data for regulators. "Maybe they felt that would get the story in the papers. Mission accomplished, I guess."
In Britain, a petition has been started opposing Sarao's extradition to the United States. So far, at least 194 people have signed up to an online message saying "One man with a single broadband connection cannot bring down an entire market."
Sarao, who court documents show pushed around millions of dollars between banks in the Caribbean, Switzerland and the Middle East, has been granted bail in London on conditions including a 5 million-pound ($7.5 million) bond.
His lawyer, Joel Smith, declined to comment on whether Sarao had yet raised the bail and been released, but said he opposes extradition to the US.
The view held by some in the market that Sarao is a scapegoat for the flash crash may not help his case much.
The complaint from the Justice Department, and the civil charges from the market regulator, the US Commodity Futures Trading Commission, stop short of blaming Sarao outright for causing the 2010 turmoil, instead referring to him as a "contributing" factor.
Moreover, the trading activity that the authorities say was illegal occurred on many days over a multi-year period, not just on May 6, 2010, when the flash crash happened.
That means that even without the flash crash, much of the substance of the complaint would still stand, experts said.
The software Sarao allegedly used to execute his trades allowed him to position himself just above or under the market while being certain the bids will never be taken up.
He did this using so-called "cancel if close" orders, which people in the market said can easily be suspect. It means that as the market price moved close to where Sarao put in his orders, they would automatically be canceled.
Michael Friedman, chief compliance officer at electronic trading firm Trillium in New York, said that market-makers, firms that smooth trading by guaranteeing prices, could legitimately do similar things.
But if people consistently cancel their orders, the case for manipulation can be made, he said. "So was there a connection between what he did and the flash crash? There certainly isn't an obvious connection if there is one at all," Friedman said.
In its complaint, the CFTC focuses on 12 days of Sarao's trading. It shows that on those days, he accounted for more than 60 percent of the order modifications in the E-mini contracts on the CME Group Inc futures exchange.
That was "more than one and a half times that of the rest of the market," the complaint says. But the documents also suggest that Sarao may not have caused volatility himself, but only benefited from wild swings that already existed.
Sarao "isn't a criminal. He is a hero. He is the sort of guy who makes the market safe for ordinary investors," John Hempton of the Australian hedge fund Bronte Capital said on a blog post, saying that Sarao's trading disrupts the trading of high frequency trading firms, which Hempton referred to as "front running computers."
"The Department of Justice has been played into bringing the full force of the US legal system onto an irrelevant trader — just to make the world safer for the real rip-off merchants," Hempton wrote on his blog.
Of the 12 days the CFTC looked at in great detail, Sarao only executed trades on four. A Reuters analysis of those 12 days show those to be more volatile and with higher volume than on average in the April 2010 to August 2011 period, which encompasses all but one of the days the CFTC cited most closely.
For most of the period covered in the complaint, spoofing was not specifically banned.
That is why the authorities charged Sarao with market manipulation, a wider concept, and harder to prove.
Some say spoofing shouldn't be illegal at all. — Reuters


Clic here to read the story from its source.