Come on, admit it.
We just don't have a freaking clue.
- Delayed flash crash arrest may herald future spoofing detection woes
Tim Massad, the head of the Commodity Futures Trading Commission, which oversees the trading of futures and swaps, said on Wednesday that it took so long to charge Sarao because of the size and complexity of U.S. derivatives markets. "These are huge markets," he said. "There's a lot going on."
- Trading at the speed of light
The faster your trading system, the quicker you can take advantage of those discrepancies. But that is not all the high-frequency traders can do. They can “front-run” news events, jumping on anything that might move a price, and get in and out of a stock before anyone else knows that something has happened. By trading at such speed, they can even get into an equity in the gap between the placing of a large buy order and the execution of it, and thereby buy just before the price rises.
- ‘Flash crash’ charges spark alarm over regulation of US markets
Sherrod Brown, the top Democrat on the Senate banking committee, told the Financial Times: “It’s encouraging that the Justice Department and [Commodity Futures Trading Commission] are pursuing this case, but troubling that it has only come to light now with the help of a whistleblower who invested substantial time in putting the pieces together.”
- 'Flash Crash' arrest shakes investors' confidence
Adding to concerns, the CFTC was alerted to Sarao's alleged misdeeds by a whistle-blower, who has not been identified, according to Shayne Stevenson, who represents the whistle-blower through Hagens Berman law firm in Seattle. Stevenson said his client brought "high-quality information" about "market manipulation" to the CFTC, which alerted the DOJ.
- Accused British 'flash crash' trader fights extradition to U.S.
A British man accused of market manipulation that contributed to the May 2010 Wall Street "flash crash" said he opposed being extradited to the United States, while the operator of the market where he traded sought to rebut prosecutors' suggestion that futures helped cause the crash.
- Roots of 'flash crash' go back further than you thought at CME
More than a year before the May 6, 2010 "flash crash," CME Group noticed questionable trading in its E-mini market by a particular electronic trader who was placing orders and cancelling them.
As the crash whipsawed the futures and stock markets in 2010, CME saw the suspicious activity again and warned the trader that day that orders must be placed “in good faith,” without an intent to cancel. The trader responded two weeks later: “Kiss my ass.”
- How computerized trading in the hands of a nobody in Britain allegedly crashed the stock market
Not everyone agrees.
- A Sweatpants-Wearing Rando Might Have Caused the Flash Crash
He seems to have executed his trades out of a modest, semi-detached house under the Heathrow flight path that he shared with his parents. He used off-the-shelf software that he souped up to make his bets. He named one shell company "Nav Sarao Milking Markets Ltd." The guy showed up to court in a pair of white sweatpants.
- 'Flash Crash' Arrest Raises More Questions Than Answers
But surely, since then regulators went through the action that took place on and around the day of the Flash Crash with a very fine comb? And if so, why did Sarao's alleged actions not jump at them as strange at the time?
- Why Did It Take So Long To Catch The ‘Flash Crash’ Futures Trader?
The CME Group declined to comment, citing the ongoing investigation. But analysts worry that the CME’s revenue model interferes with its motivation to police trading. The more trades that zip through the exchange, the more money it makes. That means it could be disincentivized from tackling manipulative traders who still bring valuable liquidity to the market.
- Spoofing the Stock Market -- Here’s One Way to Stop It
It may be a bit more complicated than that, but not much.
- Junk bonds really to blame for Flash Crash
Junk Debt collapsed a full hour before the stock market Flash Crash took place (and I would add that utilities and Treasurys were leading prior, indicating a VIX spike was possible). If junk debt collapses, how can stocks not collapse afterward when in a bankruptcy proceeding, junk debt has a higher claim on assets than equity? What caused the Flash Crash in stocks was a Flash Crash in junk debt, which was like a 1987 style crash in credit.
It's not like this is anything important.
It's not like it's the entire world economy.
Who cares whether we understand it or not?