Flash Crash: A Trading Savant, a Global Manhunt, and the Most Mysterious Market Crash in History Kindle Edition

I read and listened to Liam Vaughan’s account of Navinder Singh Sarao (Nav) journey as a trader to becoming a felon. Once on my Kindle the second time on Audible. It is a fascinating story with ominous over tones. It is well written and is well worth reading.Nav, whose parents are Sikh immigrants to Great Britain lived in Hounslow a working class neighborhood located under the flight pattern or Heathrow airport. There he lived out his life in a second floor bed room in his parents’ house. He attended a local college and completed a bachelor‘s degree in computer science.He had been a gamer in his younger years and was an avid follower of the soccer leagues. After school he applied and was hired, after proficiency testing, by IDT a company that taught candidates the principles of trading in the futures markets in exchange for a share of their profits and charges for desk rent and trade fees.Nav worked there for a few years until he became a top trader. Dissatisfied with the financial arrangements he decided to trade from his home computer situated in his bedroom. He led a monkish life and never indulged himself in the substantial profits pf his trading.He was a day trader and closed out his positions at the end of his trading day. His biggest concern was that many of his trading opportunities were constantly being snapped up by High Frequency Trading (HFT) organizations using computer trading programs driven by Artificial Intelligence Algorithms designed by Ph.Ds. in computer science, mathematics or similar disciplines. Their trades were made in nanoseconds with connections directly into the Chicago Mercantile Exchange (CME) the largest futures trading exchange in the World.The HFT computer trading programs had decimated human traders and Nav was the last of a dying breed of human day traders specializing in brief trades. The CME in 2012 registered nine trillion bid/offers a second, ninety percent of which were cancelled before being filled. Some entered and cancelled in micro secondsNav in the 2000 ought’s bought an off the shelf trading program and with the help of independent programmers modified the program to compete with the HFT algorithm’s system of offer/ bids and then withdrawing them before they could be filled. Thus confusing other HFTs and humans as to which direction the market was trending. This was called spoofing and was not specifically prohibited by regulation or statute although arguably it could fall under the rubric of market manipulation on May 6, 2010. Later on July 21. 2010 under the Dodd-Frank Act it was specifically prohibited. Proof of spoofing requires intent which is difficult to prove and the practice is still rampant to this day. Passage of the new regulations didn’t prevent another flash crash in 2015Nav was placing hundreds of thousands of offer/bids at a time positioning them so they would never be filled. His actual filled trades were done manually using a mouse. After he determined which way the market was moving reinforced by his programed offers/ bids.Nav is described a s highly focused individual on the Autistic Spectrum using very slow connection speeds in a market dominated by HFTs with the best equipment and the highest connection speeds.A whistle blower tracked Nav’s activities and submitted them to the Commodities Futures Trading Commission (CFTC). A Whistle blower, if correct, receives a bounty if the CFTC recovers money on the information given. The CFTC is a government agency limited to fines, penalties etc. on a civil basis.Nav’s trading practices were proposed as a being connected to the Flash Crash of May 6, 2010 when the market in general including equities as well a futures dipped drastically and shortly recovered in thirty six minutes causing massive losses.What caused this crash is debatable but connecting it to a small trader operating out of his bedroom in a London suburb certain made it a sexier high profile case from the prosecution standpoint.However the best the prosecution could do was to hire an academic from a respected institution to opine that Nav contributed to the flash crash. However an opinion by a hired expert is always one by an advocate for the side who hired him or her. Some are fiendishly clever and persuasive. The experts who were contacted and were not supportive of Nav having a role in the May 6, 2010 crash are not revealed which is usual by the side seeking them as experts.However the Department of Justice (DOJ) became involved, probably by the idea of linking Nav to the Flash Crash made it a much more high profile case. The DOJ brought with it many more investigative resources and penalties including jail sentences and pretrial seizure of assets.Nav almost exclusively traded in e-mini futures a derivative of the S&P 500, one the most frequently traded futures at the CME. To conclude his trading had a causative effect on the crash of the entire market is a long reach if not absurd. There still is no agreement as to what caused the crash among market professionals and experts to this day.Why Nav was singled out can only be explained that he was the low hanging fruit while other more likely culprits went on siphoning off billions of dollars at little risk and little benefit to the public pension funds, college endowments and other entries which support the public interest.If Nav was treated fairly in this case it would have been heard as a CFTC case and he would have received and admonition and perhaps a fine. By linking him to the flash crash brought a more draconian result And no real benefit to the public as we still don’t know the cause or causes of the crash and how to prevent them in the future.

Joe Public both has and needs little knowledge of how financial markets markets operate these days. The author tells a good story, but is willing to sacrifice detail for the sake of the narrative. The idea that an autistic young person could (a) make vast sums of money for himself and (b) trigger a global financial crisis is a story which begs to be told.Nav's circumstances - socially awkward and living at home in humble circumstances with his parents - add to the Wow! factor.However, the account of how Nav traded and was able to make so many millions defies examination. The story is clearly pitched at the lay reader. The expert (in which camp I place myself) wants answers to a boatload of questions which the author simply (and simply is the right word) ducks.In any event, it makes for a good read and the lay reader will emerge wiser from it, although it should, perhaps, have carried that famous warning "Don't try this at home."

As a retail trader i dont blame NAV, it may be i have a soft spot for the little guy against Goliath, but many of Navs concerns of HFT are true. It seems every time you trade now days the price moves away from the instant you put the order, and retreats when you cancel the order. This book is an interesting read, although it just may be i am addicted to this stuff, but the wording and prose of the book seems easy enough for someone that doesnt know much about the market. My personal opinion is that Nav was an escape goat, when others where doing the same thing. FYI, for my fellow small retail traders, its quite easy to spoof options. without the need of millions of dollars......do as you want with this info.

I know the markets Nav played in well for I am an E-Mini trader. What Nav accomplished is nothing short of miraculous. On top of that, he challenged some of the most powerful financial institutions in the USA....The CME Group and the CFTC. Poor Nav just wanted a level playing field, but they wouldn't give it to him.....allowing his competitors to engage in spoofing when he was told to "stop it".This was a well-written book. I hope Nav comes out with his biography soon which may provide even more details of his trading life.

This is a great read, if you're interested in stock trading or just financial crime, made more interesting that Nav is an extraordinary individual of which only a certain % of population has his ability (although it makes you wonder if you played Fifa for hours on end then maybe you can play the market like him!) Confirms your suspicions of what really goes on in the market, but just one area of many causes of volatility, on short time frames. Has some good technical insights of how he did it, and it's interesting to know that a human can still make money on these timeframes, which are extremely short day trading, up against the algos. Basically the book reveals the tactics of the big firms around that time, 2010, found by Nav during his time trying to get an edge. The book is really well written, i was addicted and finished it in a few days, thanks Liam!

This is a quick read. It tells the fascinating story of a trading mastermind who spent none of his money and instead accumulated and then lost incredible wealth by exploiting the HFT firms that leach off the rest of the market.

I was trading oil futures during the flash crash and I always wondered what had actually happened that day that caused me to lose so much money in the blink of an eye. Nevertheless, this book is a great read and I could not put it down. It’s a great insight into how high frequency trading and blackbox algorithms manipulate the financial futures markets. Great book.