23
APR
2015

Market Abuse by British trader accusation

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The day of the flash crash, May 6th 2010, is seared in many traders memories. It wiped a few businesses out, caused shock waves to many more and caused an increase in compliance which is still filtering into the system, including parts of MiFID 2.

The FCA details seven forms of market abuse and, whilst the person accused of this action that caused the flash crash seems to have definitely been involved in Manipulating Transactions, Manipulating Devices and Distortion and Misleading Behavior, a case could be argued for the other four forms of manipulation as well.
The news is full of the futures trader from a small suburban house, under the Heathrow flight path, who is trying to be extradited to the USA to answer these charges. Amazingly the Department of Justice estimates that between 2010 and 2014 he made about $40 million trading in the S&P 500 futures contracts and that was after the flash crash date.
The trader used an automated trading system to manipulate the market, putting false orders in to create false buying or selling thus moving the market to make a profit.
The CME observed his trading in 2008 and 2009 but took little action and, after the crash, it would seem that they let him continue trading.
All this time the trader continued trading and making large sums of money and living very modestly.
Whether the trader is found guilty, whether they find someone else involved in the problems of the flash crash, one thing is certain. He will always be an example in market abuse training in the future. Instead of seven case examples of market abuse, maybe there could be just the one to cover all incidences.

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