A small anecdote (that really happened) to show how professional the CFTC is: Many years ago I wanted to start a fund. As all fund managers I had to make disclosure documents (amongst a lot of other paperwork). Because it seemed stupid to me to reinvent the warm water, I copied the disclosure document from a famous existing American fund. I replaced all personal data and track record by my own data and send it to the CFTC. A few weeks later they wrote me with a full list of things they did not agree on and that had to be changed. The funny thing was that all these remarks concerned text that was copied literally from a disclosure document that they approved before for another fund! But when they approved it before, it was send to them by a famous American fund, and not by an unknown small trader (me) who started a fund. I send the original disclosure document from this famous fund to the CFTC, highlighted all the remarks they made in this original document, and asked why they approved it for the famous fund and not for me? Both documents had for these parts exactly the same text! Different people get different treatment, this will happen with this trader too.
Even this year, employees at Futex, the trading outfit where he worked, spoke of him in revered tones. In a presentation at Kings College, London, in March, a senior trader recounted his memories to a roomful of wannabe traders. “During the financial crisis, this guy, for want of a better word, had balls,” senior trader Milto Savvidis said in the video posted in March. “He used to get into big positions, he saw the risk, he saw the reward, and he took on the trades.” Day traders work on the fringe of finance. Futex is one of dozens of firms across the U.K. offering them a place to ply their trade. In exchange for a monthly fee and a share of any profits, they get a desk, screens and the chance to pick up tips. Futex also provides training on subjects like technical analysis, risk-management and psychology. Without the cushion of a monthly salary or a big-name employer, most last about 18 months, said one who traded there. Saggy Pants While many people at the firm were scratching around to make about 500 pounds a week, Sarao was clearing 500,000 pounds trading futures on the Standard & Poor’s 500 Index, said a person who worked there at the time. Sarao’s status may have been heightened by his reserved demeanor. From 2 p.m. to 9 p.m each day, clad in saggy track pants, a T-shirt and Nike Air sneakers, he rarely looked up from his desk once he’d logged on. He was described by a fellow trader as the epitome of focus, head inches from his screens, as if in another world. When a group of new recruits gathered around his desk one day, he pointed to a graph and told them it was beautiful. When they asked him why, he struggled to articulate what to him seemed so obvious. Futex’s risk manager kept a log of all the traders’ daily profits and losses on his computer. When he went home for the evening, traders would try and sneak a peak and Sarao was always at the top, one of them said.
Bear in mind government agencies are chronically understaffed (or so they'll eagerly tell you) and undercompetent (would you want to work at one?) and slipshod. http://en.wikipedia.org/wiki/Hanlon's_razor
That was a fascinating read. I'd say they've got him cold; having your broker implement a function which keeps orders out of the market, LOL.
This is ridiculous. Sarao: He lives in a small/old/cheap house. He lives with his parents. His mom works Two Jobs. He doesn't even have his own car. He used Excel spreadsheets for his trading. His bank account only has $100k in it. He shut down his algo BEFORE the crash. Authorities knew about his trading and let him continue trading for 5 Years. They bring charges just as statute of limitations expires in two weeks.
He had 8million usd in his brokerage account to make bail. Enough to cover margin on 2000 lots but still peanuts in the big scheme of things. Tax avoider so had very little cash in his own name. If they are going after him they should also go after everyone else who does the same. He was unfortunate that he made a killing on the day of the flash crash. Had he not traded that day he would still be rich and anonymous.
Took them this long to find a non US person they could hold responsible for the ills of the US markets. They did the same going after some trader in Amsterdam and blaming him for the manipulation of oil futures. Same with insider dealing, if the order came from a foreign national, boy do they get busy. I mean really, how stupid does the US think the rest of the world is. I wonder if the seemingly complicit but unnamed software company was a certain US execution futures platform.......... I agree he should be prosecuted if he broke the law - alongside all the scores and scores of US HFT firms pulling this stunt