How Flash Crash Trader Navinder Singh Sarao Made £90,000-a-Day! 😮

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How Sarao spoofed the S&P 500 futures. http://www.financial-spread-betting.c... PLEASE LIKE AND SHARE THIS VIDEO SO WE CAN DO MORE Sarao was trading from his parents house and he ended getting arrested and charged with causing the flash crash on May 6, 2010 when the Dow Jones plunged by 998.5 points on a single day. Navinder Singh Sarao was accused of fraud and market manipulation by the USA Dept. of Justice in particular of having been spoofing the market. Let's examine how Sarao actually made money from spoofing the S&P 500 futures.

Navinder Singh Sarao: Reclusive Trader or Criminal Mastermind?

Here are the FACTs.

Following graduation from Brunel University in 2003 with a computer science degree, Sarao joined the trainee trader programme at Futex, a relatively small trading house. He quickly built a reputation amongst his pals of being a brilliant but reclusive trader.

Sarao traded mainly the e-mini S&P futures which are derivatives contracts based on the S&P 500 index of US shares. A colleague recounted how Nav would trade 1,000 to 1,500 contracts at a time. In an e-mail sent to the FCA in 2007 Sarao stated that on a volatile day he would make about $133,000. On quieter days he would make between $45,000 and $70,000.

Sarao created an algorithm that would place orders into the market on the sell side and as the market would get close he would automatically cancel these orders. He was spoofing like this a year earlier but then he was placing the orders manually and as the market got close he would manually pull them away. The theory behind spoofing is this. You are placing sell side orders aggressively; people will look at this overhang of supply and will convince people to close their trades as they'll think there are many people wanting to exit. So this would create an artificial depression on price. Other algos might have noticed this and also started selling but Sarao got the blame for the flash crash. During the flash crash Sarao traded 62, 077 lots wtih a notional value of $3.5 billion and he made 879k in profit. The CME actually sent him a warning letter but he shrugged it off.

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British 'Flash Crash' Trader: Navinder Singh Sarao - How 'Spoofing' Traders Trick Markets
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