Tramondo Investment Partners AG – Unter Altstadt 10 – Postfach CH-6302 Zug

Book Club – Flash Crash

11. November 2021

On the 6th of May 2010, the bottom fell out of world markets. It all occurred about a minute after a young man named Navinder switched off the computer in his childhood bedroom. In his twenties, he still lived with his parents in a modest house in London’s working-class neighborhood of Hounslow, right under the noisy approach path to Heathrow Airport.

Many traders remember that same day for the Flash Crash. They witnessed global markets tumble without warning, wiping out a staggering one trillion US dollars of market value within a mere five minutes.

Fast-forward almost five years to the 21st of April 2015. Navinder Singh Sarao, the young man in our story, gets arrested by UK police. Carrying a maximum sentence of 380 years, he is charged by the US Justice Department with wire fraud, commodities fraud and manipulation, as well as one count of “spoofing”. Already handcuffed, and about to get taken into custody, he asks the baffled police detectives if he could just quickly run upstairs and record a football match.

A match he would not be able to watch for some time. Navinder, who lives off social security payments and devotes countless hours playing computer games, subsequently spends four harrowing months in London’s Wandsworth prison, unable to post bail set at the equivalent of USD 6.3 million. What on earth had happened?

 

Please let us know what you think of this selection, and keep your recommendations coming.

Bloomberg Quicktake Documentary

As you wait for the book to arrive, why not warm up by watching this 25 minute short documentary featuring Liam Vaughan, the reporter and author of the book.

Play Video
Courtesy of William Collins

Flash Crash

Liam Vaughan

Join us in this gripping background story that sheds light on the origins and causes of the Flash Crash of 2010, placing Navinder Sarao as the protagonist of a real-life financial thriller. Liam Vaughan, an investigative reporter with Bloomberg and Businessweek magazine in London, masterfully recounts a mystifying market crash, a globe-spanning investigation into international fraud, placing our young man Navinder in the center of it.

Vaughan tells the story of a preternaturally gifted trader who played the markets like a computer game, because, as investigations would later unveil, this is exactly what he saw in his trading. Having built a mythical reputation in London’s trading arcades before the Global Financial Crisis for his savvy futures trading, he returned to his bedroom with a mission.

Navinder had noticed that lightning-fast high-frequency trading systems had infiltrated markets and started eating into his profits. So he built a system of his own to strike back.

Depending on the perspective, Sarao is either a criminal and a symbol of a rotten financial system. Or the Robin Hood off small traders, because he took on Wall Street, the CME and the CBOE. As this excellent book will show, and even the CFTC and the US Justice system seem to agree, there is another, rather tragic aspect to the story.

 

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About Tramondo

Tramondo Investment Partners AG is a bank-independent Swiss asset manager based in Zug and licensed by the Swiss Financial Market Supervisory Authority (FINMA) to act as an asset manager of collective investment schemes. The firm is a signatory of the UN’s Principles for Responsible Investment (PRI).

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