The Day Trader and the Flash Crash: Unanswered Questions
How could a small-time trader of limited means help to almost bring down one of the world’s biggest and most liquid financial markets? Why haven’t any financial institutions, particularly those that specialize in high-frequency trading, been brought to book? And, if the Justice Department’s theory of the case is true, what does it say about the fragility of the U.S. financial system?
.. But the government charges that Sarao tried “to manipulate the market for E-Minis by placing multiple large-volume sell orders on the CME (to create the appearance of substantial supply and thus drive prices down) and modifying and ultimately canceling the orders before they were executed.
.. I’m not sure whether this version of events is plausible, but let’s just assume that it is. If so, that would mean a lone trader sitting in his parents’ West London home was responsible for setting off a stampede on the other side of the Atlantic Ocean that erased trillions of dollars of wealth, albeit temporarily.