

DOJ filing: how the Flash Crash was achieved, moment by moment [pdf] - malchow
http://online.wsj.com/public/resources/documents/SaraoDOJ04-21-2015.pdf

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akhatri_aus
Does someone have more information in whether the 'spoofing' used is illegal?

From Nanex ([http://www.nanex.net/](http://www.nanex.net/)) I occasionally
read of a practice called 'quote stuffing' which involves mass cancellation of
orders.

It seems so ridiculous that no one on Wall Street in prosecuted and yet this
guy from the UK somehow gets charged with what seems to be the common practice
of HFT firms. Does anyone have more information on this?

It just seems so out of place that the damage caused can be so single
handedly. If someone had nefarious intentions in a foreign government
attacking financial infrastructure is probably something like our generations
nukes - without the blood. I'm still dumbfounded by the scale of damage by
something economic theory/markets say shouldn't happen.

Am I an area 51 guy or is something seriously wrong?

~~~
conitpicker
read the articles - post Flash Crash they changed the rules to explicitly bar
the practice, but this case alleges that spoofing was also illegal under a
different rule.

The PDF was linked from: [http://www.wsj.com/articles/u-k-man-arrested-on-
charges-tied...](http://www.wsj.com/articles/u-k-man-arrested-on-charges-tied-
to-may-2010-flash-crash-1429636758)

"The case is part of a crackdown by criminal and regulatory authorities on
manipulative tactics used by high-speed traders, including spoofing, which was
specifically outlawed in the 2010 Dodd-Frank financial overhaul law.

That law was enacted after the flash crash; the CFTC is alleging that Mr.
Sarao violated the Commodities Exchange Act, which also prohibits manipulative
trading. It is also alleging that he violated the anti-spoofing law for
trading he engaged in beginning in 2011."

~~~
akhatri_aus
I get that. Its just quote stuffing still exists, at least according to nanex.
Wouldn't that be spoofing too?

Also this guy seemed to do this from his small house, on his own in Hounslow
without any significant infrastructure, with terrible cross atlantic latency.
It just seems so wrong that hes charged yet anything engaging in quote
stuffing is let go.

He uses a @hotmail email address. It's just so extreme how he seems out of
place. Somehow he had the resources to crash the market, or even cause a small
portion of the damage in huge, liquid markets? The S&P EMini is probably near
the top 5 most liquid instruments on earth.

------
malchow
Flash Crash discussion begins on page 23.

"SARAO's activity created persistent downward pressure on the price of
E-Minis. Indeed, during the dynamic layering cycle that ran from 11:17 a.m. to
1:40 p.m., SARAO's offers comprised 20 to 29% of the CME's entire E-Mini sell-
side order book, significantly contributing to the order book imbalance.
During that period of time alone, the E-Mini price fell by 361 basis points.
In total, SARAO obtained approximately $879,018 in net profits from trading
E-Minis that day."

