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The 2010 flash crash which created havoc among North America’s institutional trading floors may be long since passed, but the bringing to book of those responsible is still very much a current focus of the law enforcement agencies.
Navinder Singh Sarao, the British trader who is currently the subject of a charge by the US Commodity Futures Trading Commision (CFTC) for spoofing and using algorithms which netted him £27 million has now been granted £5 million bail by Westminster Magistrates Court.
This morning, LeapRate reported that Mr. Sarao had been traced by US authorities for having used unlawful tactics to gain from trading via Chicago’s prominent institutions from his home in Hounslow, West London, pictured.
Mr. Sarao now faces extradition to the United States to face trial over his activities.
The U.S. Justice Department has charged Navinder Singh Sarao, 36, of West London, with wire fraud, commodities fraud and manipulation, and one count of “spoofing”—when a trader places a bid or offer with the intent of cancelling it before execution.
During the proceedings, District Judge Quentin Purdy said that Sarao faced serious criminal charges and had “clearly upset the Americans, to put it mildly.”
The U.S. Department of Justice alleges that Sarao “used an automated trading program to manipulate the market for E-Mini S&P 500 futures contracts (E-Minis) on the Chicago Mercantile Exchange (CME).”
Mr. Sarao’s alleged manipulation of those futures tied to the Standard & Poor’s 500 Index “earned him significant profits and contributed to a major drop in the U.S. stock market on May 6, 2010, that came to be known as the ‘Flash Crash,’ ” the Justice Department said in a release.
The trade also allegedly used a “layering” strategy—a form of spoofing where “a trader places multiple, bogus orders that the trader does not intend to have executed.” These fake orders could manipulate a price by tricking other trading participants into believing there is either increased supply or demand for a security.
Mr. Sarao was arrested yesterday in Britain. U.S. authorities have requested his extradition to stand trial in America, following claims that his actions helped cause the stock market crash that saw the Dow Jones industrial average plummet 1,000 points on May 6, 2010.
Mr. Sarao told the court Wednesday that he did not agree to the extradition. Mr. Purdy set Aug. 18 and 19 as provisional dates for a full extradition hearing.
According to the report by CNBC, the extradition process from the U.K. to the U.S. is seen as controversial because the U.S. does not need to demonstrate “prima facie” evidence (enough evidence to take a case to trial) of a crime having been committed prior to extradition. This is similar to the U.K.’s extradition arrangements with many other countries.