May On Day 6, 2010, the U.S. stock market collapsed and recovered in about 36 seconds. Despite the recovery, a large number of investors lost their money when the software traded on previously set terms.
Attempts were made to explain the collapse as the cause of the structural distortion caused by the algorithms or as a result of individual investment errors. Liam Vaughan tells the story of a person convicted of collapse in his book.
Grown up in a family with an Indian background Navinder Sarao learned to be a master of futures trading, but found that as the 21st century progressed, it would lose out to ultra-fast trading algorithms. He developed an algorithm that was able to control the market with an order that erupted before it materialized. Sarao made a profit of tens of millions of dollars by buying and selling futures.
What makes the story tragic is that he lived with his parents and made most of his shops from there. He didn’t even tell his family about his millions but, with the help of his advisers, invested them in wind farms that didn’t materialize and in a Swiss fund that turned out to be a Ponzi scam.
Sarao was convicted, but he escaped prison by helping U.S. authorities identify market manipulation. In January 2020, he was sentenced to one year in solitary confinement with his parents.
Liam Vaughan: Flash Crash. A Trading Savant, a Global Manhunt, and the Most Mysterious Market Crash in History. William Collins. 2020.
Source: Tivi by www.tivi.fi.
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