UK 'flash crash trader'

Author
Discussion

NicD

Original Poster:

3,281 posts

256 months

Wednesday 22nd April 2015
quotequote all
This has to be the 'story' of the week.

This chap apparently lives in Hounslow, with his mom and dad, but wiped billions off the markets back in 2010.
Running some direct access trading software, incredible story.
Looking at his responses, he sounds barely literate, but clearly one smart guy.

Supposed to have made $40 million dollars altogether. ha ha, still living with his mom.

Just been granted bail at £5 million
http://www.express.co.uk/news/uk/572174/FBI-US-sto...
http://in.reuters.com/article/2015/04/22/flashcras...


BlackLabel

13,251 posts

122 months

Wednesday 22nd April 2015
quotequote all
Ah you beat me to it.

Mods feel free to delete the other thread.

iphonedyou

9,234 posts

156 months

Wednesday 22nd April 2015
quotequote all
Mom?

twinturboz

1,278 posts

177 months

Wednesday 22nd April 2015
quotequote all
Absolute rubbish. One man in Southall can cause the market to crash yeah ok.

Did like the bit where he told the CME to "kiss my ass"

TTwiggy

11,500 posts

203 months

Wednesday 22nd April 2015
quotequote all
He actually lives across the road from his parents but uses their address as his 'business' premises.

I suspect that he is not solely responsible for the crash but is a useful patsy. He will probably now be looking at enjoying an American 'justice' system that offers the choice between bankrupting yourself in order to plead not guilty - as well as the prospect of a life sentence - or putting his hands up to something he may not have done and hoping his lawyer can plea bargain something painless.

gamefreaks

1,955 posts

186 months

Wednesday 22nd April 2015
quotequote all
I don't really understand what he did wrong.

Surely if he was placing sell orders (on stock he didn't hold) to drop the price there was a risk that he would have to either buy at the market price to settle trades or fail to deliver?

It's just a naked short isn't it?

Dogwatch

6,222 posts

221 months

Wednesday 22nd April 2015
quotequote all
He, allegedly, cancelled the Sell orders but executed Buy orders after the price had dropped but before the market had reacted to the cancellations by rising again. Result a gain, all within milliseconds apparently. Done hundreds of times the gains mount up.

Aren't computers wonderful?

twinturboz

1,278 posts

177 months

Wednesday 22nd April 2015
quotequote all
What he was doing was spoofing.

Basically he entered large sell orders at different prices above the current market price. This made it look like there was a large amount of sellers and put selling pressure on the stock. At the same time he shorted the stock and when it moved lower due to the selling pressure of those fake orders he would buy it back cheaper, to top it he also flipped it in reverse and bought lower and sold higher once his fake orders were cancelled.

Wasn't this guy trading futures? Didn't think that had anything to do with the flash crash

Edited by twinturboz on Wednesday 22 April 20:54

NicD

Original Poster:

3,281 posts

256 months

Wednesday 22nd April 2015
quotequote all
Pretty valid comment:
'Marcus Stanley of Americans for Financial Reform, a campaign group, said Mr Sarao’s arrest highlighted the weakness of regulation and fragmented markets.

“If your kid is playing around in your house and the floor collapses, is the problem that the kid was jumping up and down or that your house was built badly? You should have a structure that should withstand this kind of thing,” he said.'
http://www.ft.com/cms/s/0/afbb9b44-e8db-11e4-b7e8-...

anonymous-user

53 months

Wednesday 22nd April 2015
quotequote all
TTwiggy said:
I suspect that he is not solely responsible for the crash but is a useful patsy. He will probably now be looking at enjoying an American 'justice' system that offers the choice between bankrupting yourself in order to plead not guilty - as well as the prospect of a life sentence - or putting his hands up to something he may not have done and hoping his lawyer can plea bargain something painless.
Quite. If what he is reported to have done is correct, it sounds extremely similar to what the big (American) HFT firms have been doing every microsecond of every trading day for the last decade. In any event I don't believe it, the e-mini is a massively liquid contract (circa 2m a day), bearing in mind you need about $3000 margin per contract, even if he was using his entire reported fortune of $40m as margin he could have 'only' traded 13000 futures... hardly enough to collapse the s&p 1000 points. And if he did get filled on that order he could lose the lot in seconds. It just doesn't make any sense. Alternatively he could be a genius who has no concept of fear.

Edited by anonymous-user on Wednesday 22 April 21:29

NicD

Original Poster:

3,281 posts

256 months

dudleybloke

19,717 posts

185 months

Wednesday 22nd April 2015
quotequote all
So did he have a copy of the orange crop forecast off Clarence Beaks?

CubanPete

3,630 posts

187 months

Wednesday 22nd April 2015
quotequote all
Good on him.

If he can manipulate the entire American market from a bedroom in his mum's house then he deserves a few quid in my opinion.

The big boys and system supervisors are just upset they've been outwitted by a (foreign) minnow.

Pesty

42,655 posts

255 months

Wednesday 22nd April 2015
quotequote all
Dogwatch said:
He, allegedly, cancelled the Sell orders but executed Buy orders after the price had dropped but before the market had reacted to the cancellations by rising again. Result a gain, all within milliseconds apparently. Done hundreds of times the gains mount up.

Aren't computers wonderful?
There was a fascinating piece about this on radio4 a year or so ago. Not this case but computers trading in micro seconds basically software evolving to beat other software and trade faster.

This isn't anything new and if it's illegal then they had better get some bigger gaols because it's not uncommon.

Hoofy

76,253 posts

281 months

Wednesday 22nd April 2015
quotequote all
biggrin

If that is the house he's been trading from and ruined the massive US market then it's not something I'd have brought to anyone's attention if I were someone important in the US!

anonymous-user

53 months

Wednesday 22nd April 2015
quotequote all
Pesty said:
Dogwatch said:
He, allegedly, cancelled the Sell orders but executed Buy orders after the price had dropped but before the market had reacted to the cancellations by rising again. Result a gain, all within milliseconds apparently. Done hundreds of times the gains mount up.

Aren't computers wonderful?
There was a fascinating piece about this on radio4 a year or so ago. Not this case but computers trading in micro seconds basically software evolving to beat other software and trade faster.

This isn't anything new and if it's illegal then they had better get some bigger gaols because it's not uncommon.
This is why I don't believe the explanation. It's absurd. No one in the UK can buy 'before the [US] market reacted' to his cancelled order when the HFT firms, who ARE the market, pay millions to co-locate their liquid nitrogen cooled servers in the same room as the exchange so the light doesn't have to travel as far down the fiber optic cables! He might as well use carrier pigeons to send his order. As for it not being uncommon; 70% of US equity volume is now through HFT firms. I guess it's possible he's running his software remotely on a rented colo server but I think that would be prohibitively expensive, even considering his profits. Secondly if he were, the HFT firms run algos to sniff out competitor strategies, there's no way it would have worked for very long, let alone 4 years. Thirdly how likely is it that a strategy that involves actually buying eminis on a day the index drops 1000 points makes money and doesn't get catastrophically run over?

I call fall guy, who may have inadvertently breached a few of the SEC/CFTC byzantine regulations whilst outwitting 'the man'. They have been under lots of pressure to explain the flash crash. A big conviction to dispel the notion that there are ghosts in the machine is just what they need. Poor chap.

Edited by anonymous-user on Wednesday 22 April 22:57

TTwiggy

11,500 posts

203 months

Wednesday 22nd April 2015
quotequote all
He's foreign and possibly Muslim. I'm surprised they haven't pinned 911 on him.

speedy_thrills

7,760 posts

242 months

Thursday 23rd April 2015
quotequote all
He may be guilty of some minor market manipulation (although, by many accounts, this is quite normal among high frequency traders) but it looks like he's about to get stitched up for a lot more.

carinaman

21,222 posts

171 months

Thursday 23rd April 2015
quotequote all
twinturboz said:
What he was doing was spoofing.
An expert said it was spoofing and using the term 'flash crash' to describe what he'd allegedly done wasn't the correct terminology.

hidetheelephants

23,771 posts

192 months

Thursday 23rd April 2015
quotequote all
The employment of computers to interact with other computers to trade stocks is insanity of the first water; this guy is a symptom of the disease, not the disease itself. What net benefit do we get from these edjits and their HFT nonsense?