If American regulators get their way, Navinder Singh Sarao will spend the rest of his life in prison for having done what generations of traders did before him: post bids and offers that he hoped wouldn’t get filled. Meanwhile, sell-siders who deliberately misled investors about the sorts of loans getting packaged into private-label MBS face little threat of jail, nor do the traders who manipulated Libor. This is not the way to restore investor confidence in the markets.
For the few of you who don’t already know what Sarao has been accused of, it helps to consider a question that DE Shaw supposedly used to ask interview candidates before it got posted to the internet: Read more
Picture the scene in the London borough of Hounslow on Tuesday lunchtime, as police moved in to arrest one Navinder Singh Sarao, holed up in a humble
end-of-terrace post-war semi.
There’ll have been prior discussion of the possible need for a special forces sniper overwatch. Someone will have remarked on the security implications of having a man like this, with a Muslim-sounding name, apparently living so close to one of the world’s major transportation hubs, airliners passing just a few hundred feet overhead every 90 seconds or so on their way to Heathrow.
Because Sarao stands accused of declaring Jihad on the S&P Futures market, the Apple Pie of American finance. Read more
One for the FT Alphaville historical log.
The CME announced on Wednesday that it would be closing most open outcry futures trading pits in Chicago and New York as of July. Only options on futures contracts and S&P 500 futures pits are to remain open.
That makes it a sad day for anyone who was inspired to become a futures operator because of, you know, that film.
It also contrasts with the LME’s decision to bring their open-outcry ring trading practices (along with their red benches) with them to their new corporate location in Finsbury Square.
Most importantly, however, it marks the end of a visual indicator for how the market is really trading, or any insight into “mood”. Once all contracts transact in the digital ether, all panics will be resigned to pixelated flash crash form visible only on screens or broker terminals. Gone forever will be the distressed pit trader photos. Read more
There’s a stupid rumour going around in the gold community that the Comex is “bleeding” inventory (especially from the JP Morgan vault) and that this will in some way compromise delivery that causes a default.
Kid Dynamite has already done the bulk of the heavy lifting in trying to debunk this story, as has Miguel Perez-Santalla at BullionVault, but we wanted to emphasise some points that go beyond the mechanics and which might be helpful. Read more