Why the Guy Who Caused the 2010 Flash Crash Isn't the Real Story

So this guy named Navinder Singh Sarao caused the 2010 "flash crash" in the stock market - a shocking and horrendous event that left traders stunned (although the good ones recovered within hours, if not minutes) and regulators in a permanent state of puzzlement - until last week. As reported, it sounded like a long, relentless investigation finally yielded the truth. That is, until Michael Lewis posted this on Bloomberg on Friday:
A guy living with his parents next to London's Heathrow Airport enters a lot of big, phony orders to sell U.S. stock market futures; the market promptly collapses on May 6, 2010; it takes five years for the army of U.S. financial regulators to work out that there might be some connection between the two events. It makes no sense.
You'd do well to read the full article carefully. If you're wondering how this one guy wreaked all that havoc, read more about it. If you've ever wondered about the efficacy of our financial regulators or the sincerity of their concern for your well-being, you need to read the this. Whether you agree with Lewis's view that high frequency trading needs to be reigned in or not, take a few minutes and carefully follow the points he raises. He's a clear thinker and writer, as opposed to many of the financial media reporters and talking heads.

Interestingly, Sarao supposedly placed his now infamous trades through the even more infamous Jon Corzine's now-defunct MF Global. Coincidence?

While that's interesting, what's really worth your time is the discussion centered on Eric Hunsader, who founded the data company Nanex and who has been one of the few points of light in the murky world of high frequency trading. If you're not familiar with him, he'll impress you as someone who actually dug deep and found facts relevant to the flash trash. When you read about how he shared his knowledge with regulators early on, you will wonder how the regulators managed to hold that information for almost five years without taking any action. It makes your head spin.

Read and learn.

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