DOJ filing: how the Flash Crash was achieved, moment by moment [pdf]

http://online.wsj.com/public/resources/documents/SaraoDOJ04-21-2015.pdf

by malchow • 11 years ago

4 4 11 years ago

online.wsj.com

malchow• 11 years ago

Flash Crash discussion begins on page 23.

"SARAO's activity created persistent downward pressure on the price of E-Minis. Indeed, during the dynamic layering cycle that ran from 11:17 a.m. to 1:40 p.m., SARAO's offers comprised 20 to 29% of the CME's entire E-Mini sell-side order book, significantly contributing to the order book imbalance. During that period of time alone, the E-Mini price fell by 361 basis points. In total, SARAO obtained approximately $879,018 in net profits from trading E-Minis that day."

akhatri_aus2• 11 years ago

Does someone have more information in whether the 'spoofing' used is illegal?

From Nanex (http://www.nanex.net/) I occasionally read of a practice called 'quote stuffing' which involves mass cancellation of orders.

It seems so ridiculous that no one on Wall Street in prosecuted and yet this guy from the UK somehow gets charged with what seems to be the common practice of HFT firms. Does anyone have more information on this?

It just seems so out of place that the damage caused can be so single handedly. If someone had nefarious intentions in a foreign government attacking financial infrastructure is probably something like our generations nukes - without the blood. I'm still dumbfounded by the scale of damage by something economic theory/markets say shouldn't happen.

Am I an area 51 guy or is something seriously wrong?

conitpicker• 11 years ago

read the articles - post Flash Crash they changed the rules to explicitly bar the practice, but this case alleges that spoofing was also illegal under a different rule.

The PDF was linked from: http://www.wsj.com/articles/u-k-man-arrested-on-charges-tied...

"The case is part of a crackdown by criminal and regulatory authorities on manipulative tactics used by high-speed traders, including spoofing, which was specifically outlawed in the 2010 Dodd-Frank financial overhaul law.

That law was enacted after the flash crash; the CFTC is alleging that Mr. Sarao violated the Commodities Exchange Act, which also prohibits manipulative trading. It is also alleging that he violated the anti-spoofing law for trading he engaged in beginning in 2011."

akhatri_aus2• 11 years ago

I get that. Its just quote stuffing still exists, at least according to nanex. Wouldn't that be spoofing too?

Also this guy seemed to do this from his small house, on his own in Hounslow without any significant infrastructure, with terrible cross atlantic latency. It just seems so wrong that hes charged yet anything engaging in quote stuffing is let go.

He uses a @hotmail email address. It's just so extreme how he seems out of place. Somehow he had the resources to crash the market, or even cause a small portion of the damage in huge, liquid markets? The S&P EMini is probably near the top 5 most liquid instruments on earth.

DOJ filing: how the Flash Crash was achieved, moment by moment [pdf]

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