In one of the most ridiculous perversions of justice, last April the SEC flipped its official narrative over the May 2010 flash crash, when it moved away from its closely held “explanation” that the 1000 point plunge in the Dow Jones was due to a trade by Waddell and Reed, and instead blamed a sole operator, London-based futures trader, Navinder Singh Sarao, who had lived with his parents (although he did not trade from the basement) for the fiasco.
After he was officially charged in 2015, for the past year and a half, Sarao had fought a long extradition battle with US prosecutors which he officially lost earlier today, when British Lord Justice Gross and Justice Nicol ruled he was to face extradition to the US. The duo said their reasons for the ruling would be set out “in due course”, according to the FT. The ruling means Sarao’s guilt or innocence will be determined in the US, where the HFT lobby has supreme authority, and not in British courts.
As the FT adds, the court hearing was the final barrier for the trader, who lost a court battle earlier this year when a judge ruled that he should be sent to the US to face trial on 22 charges ranging from wire fraud to commodities manipulation on US futures markets over a four-year period. Sarao’s extradition will begin in 28 days’ time.
To succeed in their extradition request, US prosecutors simply had to prove that Mr Sarao’s alleged actions in persistent ‘spoofing’ met the “dual criminality” test – where his conduct could constitute a criminal offence in both jurisdictions. The activity is not as clearly defined in Britain as in the US. Sarao suffered a blow earlier this year when District Judge Quentin Purdey ruled that the 36 year-old’s alleged conduct could constitute an offence in both countries and so he could be sent to the US.
In other words, the narrative has stuck that it was Sarao’s spoofing that was the necessary and sufficient to cause a flash crash, and yet with him out of the picture, recurring incidents of total liquidity loss, observed most recently in the plunge in sterling last Friday, continue on an almost daily basis.
In fact, the market fragmentations and breaches have gotten so ridiculous, none other than Citi’s Matt King mocked dubbed it a “penny stock” market…
… while one of JPM’s best analysts blamed the recurring flash crashes, most notably in the FX sector, on HFTs.
Perhaps it was not Sarao’s actions, which incidentally are done every day by thousands of traders across the globe. Perhaps, just perhaps, it is the massive, and well-funded, HFT lobby that is responsible for a market that is so broken even central bankers are concerned about the collapsing liquidity. The same HFTs, incidentally, who yesterday slammed a proposed speed bump at the Chicago Stock Exchange. As Bloomberg wrote, an industry advocacy group of proprietary, high-speed trading firms called the FIA PTG, cautioned the SEC not to approve the Chicago Stock Exchange’s proposal to delay certain orders on its venue by 350 microseconds, in a letter dated Thursday. The move would be similar to what IEX has done for stock trading.
According to the FIA PTG group, the Proposed CHX delay would unfairly advantage certain traders and boost odds of market manipulation. Of course, what they meant was that without an ability to frontrun, and manipulate, yet another exchange it is the HFT lobby that would lose out.
“Many of our members might be in a position to benefit” from the delay, FIA PTG wrote; “however, we believe that it would be a negative development for U.S. equity market structure, add unwarranted complexity, and create a bad precedent for this and other types of discriminatory artificial delays.”
Odd, because the SEC overruled all that recently when it granted IEX exchange status.
For those wondering who makes up the group of “traders” eager to preserve a status quo that rewards HFT frontrunning, here is the answer: FIA PTG’s members include Citadel Securities, DRW Holdings, IMC Financial Markets, Jump Trading, KCG Holdings
But back to Sarao: as the FT writes, his offenses carry sentences totaling up to 380 years.
Meanwhile, sunbathing on a beach somewhere…
The post “Flash Crash Mastermind” Navinder Sarao To Be Extradited To The US, Faces Up To 380 Years In Jail appeared first on crude-oil.top.