Putting the Flash Crash in perspective

Mechanical Markets often hits the nail on the head when writing about the trading industry. In his most recent blog he put the flash crash in perspective as well as underlining the fact that exchanges do require additional safety checks. 

You can find the blog here. Check out the other topics as well. It's well worth the read!

Flash crasher not a flash boy

After a 5 year investigation, the CFTC finally has found someone they can tie to the infamous flash crash of of May 6, 2010. 

UK resident Navinder Sarao, a relatively small futures trader has been charged with wire fraud, 10 counts of commodities manipulation and 1 count of spoofing.

Sceptics, like Zerohedge see a 'patsy', an Oswaldesq scapegoat found to deflect blame for HFT and a failing controlling body like the CFTC. Regular media meanwhile call Sarao an HFT trader, while industry professionals are quick to point out that someone trading off a spreadsheet, using 'off the shelf' trading software from a residential house in London suburbia can by no means be considered HFT.

Perhaps Sarao was just innocently 'at the wrong place, in the wrong time', perhaps he was a petty market manipulator caught in the 'perfect storm', or even perhaps he was the perfect scapegoat working at the book depository. All these scenario's are better than the idea that a single 'nobody' can crash the market. If that's really the case, there is a serious problem with the way the market operates.