A high
frequency trader in the UK has been arrested on charges he manipulated
financial markets and helped precipitate the 2010 "Flash Crash,"
which saw US markets inexplicably plummet hundreds of points within minutes.
Deutsche Welle, 22 April 2015
Navinder
Singh Sarao is alleged to have made $40 million trading off the plunge he
helped initiate. The May 2010 "Flash Crash" saw the US Dow Jones
Industrial Index plunge more than 1,000 points before recovering toward the end
of the trading day.
The US
Justice Department has charged the 37-year-old, of Hounslow, UK, with wire
fraud, commodities fraud and manipulation.
Sarao also
faces civil charges from the Commodity Futures Trading Commission (CFTC), which
called him "a very significant player in the market."
"His
conduct was at least significantly responsible for the order imbalance that in
turn was one of the conditions that led to the flash crash," CTFC head of
enforcement head Aitan Goelman said on a conference call with reporters.
Sarao
"allegedly traded in a manner designed to profit from this temporary
artificial volatility," the CFTC said.
Extradition
request
The case
against Sarao is the first time US regulators have alleged that market
manipulation played a role in the crash, which is still being investigated.
Sarao will
appear in a London court on Wednesday. The US Justice Department will request
he be extradited to the United States to face the charges.
A defense
attorney has not yet commented on the allegations against Sarao.
High
frequency traders use automated computer systems to purchase and sell
securities in fractions of a second, making small profits that rapidly
accumulate on account of the large volume of trades made.
The May 6,
2010 "Flash Crash" damaged investor confidence and led to a series of
federal regulations designed to prevent a repeat.
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