Trader blamed for flash crash

A British financial trader has been arrested on charges of triggering the 2010 "flash crash" a sharp, short-lived fall in the US markets that took place on 6 May 2010. Navinder Singh Sarao is accused of sending "spoof" orders to sell E-mini futures contracts (derivatives based on the value of the S&P 500 index).

Spoofing involves placing a large volume of orders at prices that are not intended to be executed with intention of creating the impression of a large volume of selling (or buying) pressure in the market. This can encourage other traders to sell (or buy), thereby potentially driving the market down (or up).

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What the commentators said

Quite, said Bloomberg View's Matt Levine. "The markets were nervous and his spoof orders probably made them more nervous." But it seems unlikely that he "caused the whole crash".

The authorities have previously tried to blame the event on a small asset manager in Kansas. Now they seem to be abandoning that in favour of a "new one-guy-in-London theory". You'd be wise to remain sceptical of this claim as well.

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