The more I read into the curious case of Navinder Sarao, the more baffled I am as to the intensity of both the authority’s response and the press coverage.
Sarao’s case has attracted worldwide media attention as the “man charged with causing the flash crash”.
This has been followed by numerous articles claiming how it is impossible that one man caused the flash crash.
Of course it is.
But, in fact, the flash crash is not at the heart of the charges and the coverage stems from a small section of the charge document entitled (but not in fact explaining) Sarao’s Manipulative Activity Contributed to the Flash Crash.
Sarao is being charged with market manipulation stemming from a strategy that was heavily reliant on layering.
Now layering is of course an illegitimate trading strategy but the response from (and indeed even the involvement of) the FBI is baffling.
Why is a prop trader from Hounslow facing years in prison for spoofing?
There have been a number of charges in recent years for layering. The first came in 2010 when Finra charged traders at Trillium Trading and last year the co-founder and others at Visionary Trading were charged by the SEC.
Both charges were settled by a fine (substantially lower than Sarao’s £5m bail in both instances), neither involved the FBI and no one was even threatened with prison or criminal prosecution.
It just doesn’t make sense.