"Flash Crash" UK trader in court

Wednesday 22 April 2015

A futures trader arrested in Britain in connection with the "Flash Crash" in the US five years ago - when the Dow Jones Industrial Average plunged 600 points in five minutes - will appear in court today.

The US is requesting the extradition of Navinder Singh Sarao (36) of Hounslow, west London, for alleged fraud.

Scotland Yard said he would appear in custody at Westminster Magistrates Court after being arrested by officers from the Metropolitan Police Service's extradition unit on behalf of the US authorities.

The US Department of Justice said he had been charged in a federal criminal complaint in the Northern District of Illinois with one count of wire fraud, ten counts of commodities fraud, ten counts of commodities manipulation, and one count of "spoofing", a practice of bidding or offering with the intent to cancel the bid or offer before execution.

He is accused of using an "automated trading programme" to manipulate the market for E-Mini S&P 500 futures contracts (E-Minis) on the Chicago Mercantile Exchange. E-Minis are stock market index futures contracts based on the Standard & Poor's 500 Index.

His alleged manipulation earned him significant profits and contributed to a major drop in the US stock market on May 6 2010 that came to be known as the "Flash Crash", when the Dow Jones Industrial Average fell by about 600 points in five minutes, following a drop in the price of E-Minis, the Justice Department said.

According to the complaint, Sarao allegedly placed multiple orders, then cancelled them without executing them, leading prices to fall.

The Justice Department statement said: "When prices fell as a result of this activity, Sarao allegedly sold futures contracts, only to buy them back at a lower price. Conversely, when the market moved back upward as the market activity ceased, Sarao allegedly bought contracts, only to sell them at a higher price."