The AlphaMind Podcast is sponsored by The Society of Technical Analysts
July 7, 2020

#48 Flash Crash - Liam Vaughan on Navinder Sarao and the 2010 Flash Crash

#48 Flash Crash - Liam Vaughan on Navinder Sarao and the 2010 Flash Crash

A young man amasses $70,000,000 in trading profits, is accused of causing one of the biggest Stock Market Crashes ever, is the subject of a major US govt investigation and a multimillion-dollar manhunt, and all from his upstairs bedroom, in his parent’s modest house, in an ordinary London suburb, without his family or friends having a clue. 

This week’s guest, Liam Vaughan, wrote the book ‘Flash Crash’, which tells the incredible story of Navinder Singh Sarao and the 2010 Flash-crash. 

In this modern Robin Hood tale, Vaughan tells how Sarao managed to become one of world’s top 5 trading participants by volume in the e-mini S&P futures globally. This futures contract is one of the world’s largest and most actively traded contracts, with other participants in this market include major investment banks, international investment firms and global hedge funds. 

Vaughan, who also wrote the book ’The Fix’, about the LIBOR scandal is a master story teller. In this interview, Steven Goldstein and Mark Randall, both market veterans, and former participants in the futures market, discuss with Liam in an open and frank manner a wide range of themes and topics about this incredible story including:

  • Did Sarao’s obsession growing up playing computer games may have come to be a major advantage to his screen-based trading activities.
  • The paradoxes in Sarao’s character traits and how these supported his success as a trader but at the same time left him vulnerable in other areas of his life.      
  • How Navinder’s gifts and mental attributes, seen by some as learning difficulties, probably worked in his favour in his trading activities. 
  • How Navinder’s mindset and very different relationship with money may have contributed to his fearlessness and his trading style. 
  • Having a grudging admiration for what Sarao achieved
  • How the laws changed after Sarao commenced his spoofing activities and after the Flashcrash. 
  • How Navinder’s activity exposed the frailties within the Electronic Futures Trading system and how new platforms increasingly developed the ability to manipulate markets. 
  • How Navinder had felt the market was rigged against him by other people who had unfair advantages, including other spoofers and HFT traders. 
  • Debating whether his activities followed the failure of the authorities to act on his complaints about the activities of others, and whether by ignoring the authorities effectively green-lighted his activities.  
  • The huge gulf which exists between the resources and level of expertise in those regulating and policing trading activities and those of the firms and people engaging in activities in markets.
  • The importance of balance between your trading activities, and the other parts of your life.  
  • Whether Navinder was ultimately a victim in this story. 

You can find our more about Liam on his website and can order the book direct form there. - The book was released in May this year in Hardback, Audible or Kindle form iand s called Flash Crash: A Trading Savant, a Global Manhunt and the Most Mysterious Market Crash in History.