Flash Crash: 'Hound of Hounslow' trader was an insomniac with a huge ego, emails reveal
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Version 0 of 1. The 'Hound of Hounslow' trader accused of helping to cause the wildest stock market swing in US history was a self-described insomniac and was once hungry for publicity from the financial press, according to emails released by the American financial authorities. Navinder Singh Sarao, 36, who is fighting extradition to the US after being arrested this week at the west London home he shares with his parents, wrote an email to his broker in 2012 explaining his trading patterns and saying, "I normally can’t get to sleep before 4am". Mr Sarao also wrote to a trade publication in 2007 asking to be included on its list of top 30 traders under the age of 30. "You must understand that for me to be in the top 30 is not a vanity thing," he wrote. Mr Sarao explained that though he normally preferred to keep a low profile he thought the publicity might be useful for a new trading business he was planning to set up. In that same email Mr Sorao also boasted his trading in futures contracts could make him up to $133,000 (£88,000) a day. Singh Sarao is accused of bringing about a Wall Street “flash crash” (Getty) Mr Sarao stands accused by the US Department of Justice of “spoofing”, which involves illegally manipulating financial markets through marking large offers to buy or sell securities that are cancelled before being processed. They claim that his fraudulent activities helped create the conditions for the 6 May 2010 “flash crash” where the Dow Jones Index mysteriously plummeted 9 per cent in a few minutes before rapidly recovering. But in email to the Financial Conduct Authority (FCA), the UK financial regulator, dated 29 May 2014 Mr Sarao seems to be justifying his trading techniques as entirely innocent. “I am a trader who changes his mind very, very quickly,” he writes. “What makes me change my mind? Well it could be anything… For the large part it’s just my intuition.” The US authorities claim Mr Sarao used automatic computer programmes to trade. But last year he sought to persuade the FCA that he was an “old school” low-tech trader. “I am still using the mouse to trade,” he wrote. Mr Sarao also told the FCA that his company “is basically me, it is a one-man band”. Photographers try to take photos through the windows of a prison van believed to be transporting Navinder Singh Sarao Mr Sarao is alleged by US regulators to have made $879,000 on the day of the flash crash and $40m over the four years to 2014. In the 2012 email to his broker at the firm R J O’Brien he claimed he had made “the majority of my net worth … in no more than 20 days’ trading”. It has emerged that the Chicago Mercantile Exchange, the electronic futures market where Mr Sarao remotely executed his trades, contacted him as early as March 2009 to query his trading activities but that the operator never followed up on its concerns. US regulators are now under growing pressure for failing to bring charges against Mr Sarao for so long. Yet many traders are sceptical of the idea that the behaviour of Mr Sarao could have been a key factor of the 2010 flash crash. “If he was able to do that, then he is a genius” said one. Others have speculated that the CME might have been unwilling to investigate Mr Sarao’s alleged market abuse too closely because it had no financial incentive to do so. One futures trader, who declined to be named, said: “When people started trading in such huge volume the money the exchanges made went through the roof. No wonder they were willing to turn a blind eye.” |