UK trader arrested over US 'flash crash'

An Indian-origin British trader was today arrested in the UK for his alleged role in triggering the May 2010 Wall Street "flash crash" which wiped billions of dollars off the value of US shares in minutes.
Navinder Singh Sarao, 37, was arrested Tuesday morning at his home in London on charges of wire fraud, commodities fraud and manipulation charges, prosecutors in the US said during a news conference.
Sarao's alleged manipulation earned "significant profits" and contributed to the so-called "Flash Crash" of May 6, 2010, when the Dow Jones Industrial Average fell by about 600 points in a five-minute span after a big drop in the price of E-Minis.

The flash crash prompted widespread concern about the role of high-frequency trading and its impact on wider market stability, New York Times reported.
According to the complaint, which was unsealed today, Sarao is accused of using an automated trading programme to manipulate the market for E-Mini S&P 500 futures contracts on the Chicago Mercantile Exchange. E-Minis are stock market index futures contracts based on the Standard & Poor's 500-stock index.
Prosecutors said that Sarao's actions earned him significant profits and contributed to the precipitous drop in the market.

From April 2010 to present, Sarao and his firm, Nav Sarao Futures Limited, have made a profit of more than USD 40 million from E-mini S&P trading, regulators say. About USD 7 million of his assets have been frozen.

"We believe that we can show that he was a significant factor in the market imbalance and the market imbalance was one of the chief conditions" of the flash crash, Aitan Goelman, director of enforcement at the Commodity Futures Trading Commission, said on conference with reporters.
Goelman said that Sarao used both software tools and manual trading to manipulate the price of the S&P e-Mini, using off-the-shelf software that he modified. The scheme lasted for about 400 days from 2010 to 2014, regulators said.
The US is requesting his extradition.