‘Flash Crash’ in review: Were they looking for just anyone to blame?
Almost exactly 10 years ago – 6 May 2010 at 14:32 US Eastern Time – the Dow Jones Industrial Average suffered its second worst ever intra-day loss of 998 points – in just 5 minutes; it then took half an hour to get back to where the shambles started. Five years on, in April 2015 at the age of 36, Navinder Singh Sarao was indicted on 22 charges of financial misdemeanours. The authorities realised that market integrity was at stake and so, the Commodity Futures Trading Commission, Securities Exchange Commission, the FBI and the UK Met’s boys in blue swung into action.
I remember when the story broke, of how he was trading from his childhood bedroom in his parents’ modest suburban home, how he dressed shabbily despite allegedly being worth the millions nobody knew about, how he made sure he hopped on London Transport after 09:30 to take advantage of off-peak fares. At the time, many headlines called him the ‘Hound of Hounslow’; I too wrote about him, but felt the ‘Hounslow Boy’ was a better title.
I think my instinct was correct because while Sarao did plead guilty to ‘spoofing’, the US Department of Justice dropped most of the charges against him and this year he’s got off with one year of home incarceration rather than the several centuries of imprisonment he faced.
This is revealed in the book by Bloomberg columnist Liam Vaughan published recently by Doubleday. Titled: ‘Flash Crash: a Global Manhunt and the Most Mysterious Market Crash in History’, the book was recently reviewed by the Financial Times’ Katie Martin.
It turns out that Nav, as his work mates called him, was a mathematical prodigy who loved spotting patterns – as well as a social misfit with Asperger’s syndrome. She writes: ‘It is an engaging history lesson on the evolution of modern trading, the conflicting demands it seeks to serve, and its dislocation from any social purpose. It is an alarming insight into the motivations of prosecutors who are, at times, desperate just to see someone, anyone, pay’.
Tags: Flash crash, high speed trading, pattern recognition
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