UK trader arrested for May 2010 U.S. Stock market flash crash
- Thread starter just21
- Start date
Powerful people or powerful organizations get away with murder....so whistleblowers BEWARE.
Be ready to lose everything, even your freedom, when you file official complaints against these people.
Market Cops Got Power to Pursue Spoofers After Years of Failure
Traders Magazine Online News, May 15, 2015
Matthew Leising
(Bloomberg) -- The Commodity Futures Trading Commission was tired of losing.
With only one court victory in manipulation cases dating back to the agency’s creation in 1974, concern had swelled at the little-known regulator that help was needed to catch cheaters in U.S. derivatives markets. They got it with the Dodd- Frank Act in 2010, which ushered in the most sweeping reforms of Wall Street rules since the 1930s.
“When I first heard about the high hurdle we had to prove manipulation, it amazed me,” said Bart Chilton, a CFTC commissioner from 2007 to 2014. “The fact that there was only one successful case in 35 years was the best argument we had for why the law needed to be changed.”
The tool that the CFTC won -- a new category of illegal, or “disruptive,” trading -- now faces its biggest test following the April 21 arrest of Navinder Singh Sarao. U.S. prosecutors allege that the London-based stock-futures trader engaged in five years of improper conduct known as layering and spoofing and contributed to the May 2010 plunge known as the flash crash.
Long before anyone had heard of Sarao, CFTC officials knew they had to sharpen their ability to prove manipulation in the markets they oversee. Prior to Dodd-Frank, agency lawyers had to prove four elements in a manipulation case, including that an “artificial” price had been created. That had proved to be very difficult over the years.
“Everyone on the commission, including myself, agreed we needed broader authority in this area,” said Jill Sommers, a commissioner from 2007 to 2013. The goal, she said, was “to not have such a high bar when it came to proving manipulation.”
Gensler’s Request
The original impetus to seek a simpler means of proving manipulation came from CFTC Chairman Gary Gensler, who instructed both the general counsel’s office and the enforcement division to devise a new method, said Dan Berkovitz, the regulator’s general counsel from 2009 to 2013.
The spoofing definition first appeared in the version of Dodd-Frank passed by the House of Representatives on Dec. 11, 2009, according to a history of the bill posted on the website of the Law Librarians’ Society of Washington D.C. The Senate passed its version on May 20, 2010. President Barack Obama signed it into law on July 21, 2010.
“This was a big provision to get in there,” Berkovitz said. “To get away from the four-part test and have a simpler test for conduct that is basically a type of manipulation was a really powerful tool for the agency.”
Juice, Eggs
The old manipulation definition was written to prevent a squeeze on physical commodities like frozen concentrated orange juice or eggs, Berkovitz said. But markets had evolved well beyond that, with most trading linked to intangible assets like the stock futures Sarao bought and sold, and bets on interest rates. Dodd-Frank made the rules reflect the new reality.
“It was really important to get the commission the authority that was more tailored to the modern market,” Berkovitz said.
Now it’s up to the U.S. government to see whether it can secure a conviction of Sarao using the simpler standard.
Traders Magazine Online News, May 15, 2015
Matthew Leising
(Bloomberg) -- The Commodity Futures Trading Commission was tired of losing.
With only one court victory in manipulation cases dating back to the agency’s creation in 1974, concern had swelled at the little-known regulator that help was needed to catch cheaters in U.S. derivatives markets. They got it with the Dodd- Frank Act in 2010, which ushered in the most sweeping reforms of Wall Street rules since the 1930s.
“When I first heard about the high hurdle we had to prove manipulation, it amazed me,” said Bart Chilton, a CFTC commissioner from 2007 to 2014. “The fact that there was only one successful case in 35 years was the best argument we had for why the law needed to be changed.”
The tool that the CFTC won -- a new category of illegal, or “disruptive,” trading -- now faces its biggest test following the April 21 arrest of Navinder Singh Sarao. U.S. prosecutors allege that the London-based stock-futures trader engaged in five years of improper conduct known as layering and spoofing and contributed to the May 2010 plunge known as the flash crash.
Long before anyone had heard of Sarao, CFTC officials knew they had to sharpen their ability to prove manipulation in the markets they oversee. Prior to Dodd-Frank, agency lawyers had to prove four elements in a manipulation case, including that an “artificial” price had been created. That had proved to be very difficult over the years.
“Everyone on the commission, including myself, agreed we needed broader authority in this area,” said Jill Sommers, a commissioner from 2007 to 2013. The goal, she said, was “to not have such a high bar when it came to proving manipulation.”
Gensler’s Request
The original impetus to seek a simpler means of proving manipulation came from CFTC Chairman Gary Gensler, who instructed both the general counsel’s office and the enforcement division to devise a new method, said Dan Berkovitz, the regulator’s general counsel from 2009 to 2013.
The spoofing definition first appeared in the version of Dodd-Frank passed by the House of Representatives on Dec. 11, 2009, according to a history of the bill posted on the website of the Law Librarians’ Society of Washington D.C. The Senate passed its version on May 20, 2010. President Barack Obama signed it into law on July 21, 2010.
“This was a big provision to get in there,” Berkovitz said. “To get away from the four-part test and have a simpler test for conduct that is basically a type of manipulation was a really powerful tool for the agency.”
Juice, Eggs
The old manipulation definition was written to prevent a squeeze on physical commodities like frozen concentrated orange juice or eggs, Berkovitz said. But markets had evolved well beyond that, with most trading linked to intangible assets like the stock futures Sarao bought and sold, and bets on interest rates. Dodd-Frank made the rules reflect the new reality.
“It was really important to get the commission the authority that was more tailored to the modern market,” Berkovitz said.
Now it’s up to the U.S. government to see whether it can secure a conviction of Sarao using the simpler standard.
http://en.wikipedia.org/wiki/Gary_Gensler:
"After earning an MBA, Gensler joined the Wall Street investment bank Goldman Sachs, where he spent 18 years working up the ranks.[8] At 30, Gensler became one of the youngest persons to have made partner at the firm at the time.[9] He spent the 1980s working as a top mergers and acquisitions banker, having assumed responsibility for Goldman’s efforts in advising media companies.[10] He subsequently made the transition to trading and finance[11] in Tokyo,[1] where he directed the firm’s Fixed Income and Currency trading.[10]
While at Goldman Sachs, Gensler led a team that advised the National Football League in capturing the then-most lucrative deal television history, when the NFL secured $3.6 billion deal selling television sports rights.[12]
Gensler's last role at Goldman Sachs was Co-head of finance, responsible for controllers and treasury worldwide.[13] In that capacity, he managed more than 500 people funding and accounting for a then-$250 billion enterprise. Gensler left Goldman after 18 years to enter public service,[14] when he was nominated by President Bill Clinton and confirmed by the U.S. Senate to be the Assistant Secretary of the Treasury.[7]"
It might have been the reason they nailed him. He should have kept is head down. Not too smart to bite the hand that feeds you.
The second we embrace that kind of world....
Please. The guy gets calls from the CME investigating his trading. Then he turns around and lodges not 1 or 2 complaints, but 100!
The smart move after being investigated is to keep your head down. Now he knows.
http://www.businessinsider.com/navinder-singh-sarao-blew-the-whistle-on-other-traders-2015-5
Or maybe some people aren't cowards and speak up when one type of manipulative behavior (HFTs) is considered acceptable while other types on the other side of the coin (spoofing) are deemed unacceptable.