THAT America’s stockmarkets dropped by 10% in a few minutes on May 6th 2010 was worrying enough, even if they did bounce back quickly. Worse still was the realisation that nobody understood why or how it had happened. After pointing the finger in various directions, American authorities have settled on an unlikely culprit: Navinder Singh Sarao, a 36-year-old British day-trader they now want to extradite to face an assortment of criminal and civil charges.
Market watchdogs would not have expected the source of the “flash crash”, as it came to be known, to be a lone trader based in a nondescript semi-detached house in Hounslow, an unfashionable suburb nestled between central London and Heathrow airport. But they would be less surprised by the methods he is accused of using, most notably “spoofing”, a common form of market manipulation.
According to the charge sheet, Mr Sarao would routinely place a series of orders to sell futures contracts that would only be profitable if the S&P 500 share index fell. The authorities claim that a computer programme he...
from The Economist: Finance and economics http://ift.tt/1HrdMmY
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