Navinder Singh Sarao, a 36-year-old trader working from his parents’ home in West London, was arrested for contributing to the 2010 “flash crash” in the United States. The flash crash saw the Dow Jones Industrial Average plunge 600 points in five minutes, erasing nearly $1 trillion in market value. Sarao was charged with wire fraud, commodities fraud and market manipulation. He allegedly used an automated trading programme to manipulate the market for E-Mini S&P 500 futures contracts on the Chicago Mercantile Exchange. Sarao’s actions reportedly created the impression of substantial supply, causing prices to fall. He then bought contracts at the lower prices and sold them at a profit when the market corrected itself. Sarao is believed to have made $40 million from this scheme between 2010 and 2014. His case raises questions about the effectiveness of market surveillance and the role of high-frequency trading in market instability.
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