US blames Dow flash-crash on British-Indian trader, seeks his extradition - The Times of India: "The trader was identified by the US Justice Department as Navinder Singh Sarao, 37, of Hounslow, in the UK.
Sarao was charged in a federal criminal complaint with one count of wire fraud, 10 counts of commodities fraud, 10 counts of commodities manipulation, and one count of ''spoofing,'' a practice of bidding or offering with the intent to cancel the bid or offer before execution.
According to the complaint, which was unsealed on Tuesday, Sarao allegedly used an automated trading program to manipulate the market for E-Mini S&P 500 futures contracts (E-Minis) on the Chicago Mercantile Exchange (CME). E-Minis are stock market index futures contracts based on the Standard & Poor's 500 Index.
Sarao allegedly employed a ''dynamic layering'' scheme to affect the price of E-Minis. By allegedly placing multiple, simultaneous, large-volume sell orders at different price points -- a technique known as ''layering'' -- Sarao created the appearance of substantial supply in the market.
As part of the scheme, Sarao allegedly modified these orders frequently so that they remained close to the market price, and typically cancelled the orders without executing them. When prices fell as a result of this activity, Sarao allegedly sold futures contracts only to buy them back at a lower price. Conversely, when the market moved back upward as the market activity ceased, Sarao allegedly bought contracts only to sell them at a higher price.
Prosecutors said Sarao used off-the-shelf software that he modified to manipulate the trading and his actions earned him more than $ 40 million.
US authorities said Sarao was not solely to be blamed for the crash, but ''his conduct was significantly responsible for the order unbalance, which was one of the conditions'' that led to the crash. They have sought Sarao's extradition from UK. "
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