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UK trader held over US shares crash

A futures trader was arrested in Britain today in connection with the "Flash Crash" in the United States five years ago when the Dow Jones Industrial Average plunged 600 points in five minutes.

The US Justice Department said Navinder Singh Sarao, 37, of Hounslow, west London, had been held and the US was requesting his extradition.

He has been charged in a federal criminal complaint in the Northern District of Illinois with one count of wire fraud, 10 counts of commodities fraud, 10 counts of commodities manipulation, and one count of "spoofing", a practice of bidding or offering with the intent to cancel the bid or offer before execution, the Department said in a statement.

He is accused of using an "automated trading programme" to manipulate the market for E-Mini S&P 500 futures contracts (E-Minis) on the Chicago Mercantile Exchange (CME). E-Minis are stock market index futures contracts based on the Standard & Poor's 500 Index.

His alleged manipulation earned him significant profits and contributed to a major drop in the US stock market on May 6 2010 that came to be known as the "Flash Crash", when the Dow Jones Industrial Average fell by about 600 points in five minutes, following a drop in the price of E-Minis, the statement said.

According to the complaint, Sarao allegedly placed multiple orders, then cancelled them without executing them, leading prices to fall.

The statement said: "When prices fell as a result of this activity, Sarao allegedly sold futures contracts, only to buy them back at a lower price. Conversely, when the market moved back upward as the market activity ceased, Sarao allegedly bought contracts, only to sell them at a higher price."

Scotland Yard said later that Sarao, whose age they gave as 36, was arrested by officers from the Metropolitan Police Service's extradition unit on behalf of the US authorities in connection with alleged fraud.

He will appear in custody at Westminster Magistrates' Court tomorrow.

There was no answer at the semi-detached 1930s house Mr Sarao is understood to live at with his parents.

Neighbours said the Sikh family have lived in the quiet suburban street in Hounslow in west London for many years.

Residents in the street said they saw around 20 people streaming in and out of the house this morning, and an unmarked police car parked outside.

A neighbour, who asked not to be named, said: "I was taking my son to school this morning at around 8.15am and then I saw around ten people in their front garden.

"I saw the mother who lives there walk over from her other son's house, who lives across the road. She didn't look very happy.

"And I saw an unmarked police car with plain clothed officers inside. The family keep themselves to themselves."

Another neighbour, who also asked not to be named, said: "A neighbour told me they saw around 20 people coming in and out of the house, and police cars."

Another said: "I saw the police first thing this morning in the front garden. There were cars and plain-clothed officers."


From Belfast Telegraph