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Flash Crash: A Trading Savant, a Global Manhunt, and the Most Mysterious Market Crash in History
"[An] extraordinary tale"—Wall Street Journal"Compelling [and] engaging"—Financial Times"Magnificently detailed yet pacy...Think Trading Places meets Wall Street"—Sunday Times (UK)The riveting story of a trading prodigy who amassed $70 million from his childhood bedroom—until the US government accused him of helping trigger an unprecedented market collapseOn May 6, 2010, financial markets around the world tumbled simultaneously and without warning. In the span of five minutes, a trillion dollars of valuation was lost. The Flash Crash, as it became known, represented what was then the fastest drop in market history. When share values rebounded less than half an hour later, experts around the globe were left perplexed. What had they just witnessed?Navinder Singh Sarao hardly seemed like a man who would shake the world's financial markets to their core. Raised in a working-class neighborhood in West London, Nav was a preternaturally gifted trader who played the markets like a computer game. By the age of thirty, he had left behind London's "trading arcades," working instead out of his childhood home. For years the money poured in. But when lightning-fast electronic traders infiltrated markets and started eating into his profits, Nav built a system of his own to fight back. It worked—until 2015, when the FBI arrived at his door. Depending on whom you ask, Sarao was a scourge, a symbol of a financial system run horribly amok, or a folk hero who took on the tyranny of Wall Street and the high-frequency traders.A real-life financial thriller, Flash Crash uncovers the remarkable, behind-the-scenes narrative of a mystifying market crash, a globe-spanning investigation into international fraud, and a man at the center of them both.
244 pages, Kindle Edition
First published May 12, 2020
380 people are currently reading
8545 people want to read
About the author
Liam Vaughan
8 books37 followersLiam Vaughan is an investigative journalist for Bloomberg and Bloomberg Businessweek. He has been awarded the Gerald Loeb prize for excellence in business journalism and the Harold Wincott prize for financial journalism.
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Displaying 1 - 30 of 215 reviews
May 13, 2020
Ah, there's no better time to read a book that examines that many problems with late-stage capitalism than during a pandemic being made worse by late-stage capitalism!!!!
Liam Vaughan's Flash Crash is an immersive look at how a sloppy stew of bureaucratic fuckery, financial greed, unchecked wealth and privilege, and unbridled technocratic optimism all coalesced at the same time to create the perfect conditions for day trader Navinder Singh Sarao to perpetuate the flash crash of 2010.
Vaughn does a impactful job showing the many sides of the debate surrounding Sarao's case. Is he a hero, a criminal, a conspiracy theorist, an arrogant libertarian, or all of the above? And are ~the markets~ even a good thing? At the center, however, is the important question of why Sarao, who was an outlier in the industry in more ways than one, became the person who paid the price, as opposed to folks who had far bigger roles in creating the problems with banking, trading, and financial regulation.
Flash Crash has got some sections that get pretty technical, but Vaughan does a solid job working through terminology and showing how so many moving parts fit together. It may be of particular interest to fans of Michael Lewis' books (especially Flash Boys and The Big Short) as well as more atmospheric non-fiction reads like John Carreyrou's Bad Blood and Nick Bilton's American Kingpin.
Liam Vaughan's Flash Crash is an immersive look at how a sloppy stew of bureaucratic fuckery, financial greed, unchecked wealth and privilege, and unbridled technocratic optimism all coalesced at the same time to create the perfect conditions for day trader Navinder Singh Sarao to perpetuate the flash crash of 2010.
Vaughn does a impactful job showing the many sides of the debate surrounding Sarao's case. Is he a hero, a criminal, a conspiracy theorist, an arrogant libertarian, or all of the above? And are ~the markets~ even a good thing? At the center, however, is the important question of why Sarao, who was an outlier in the industry in more ways than one, became the person who paid the price, as opposed to folks who had far bigger roles in creating the problems with banking, trading, and financial regulation.
Flash Crash has got some sections that get pretty technical, but Vaughan does a solid job working through terminology and showing how so many moving parts fit together. It may be of particular interest to fans of Michael Lewis' books (especially Flash Boys and The Big Short) as well as more atmospheric non-fiction reads like John Carreyrou's Bad Blood and Nick Bilton's American Kingpin.
February 6, 2020
Too crazy not to be true
Financial investigative journalist Liam Vaughan seems to have had the time of his life putting together Flash Crash. But then, the story is so rich with characters and so bizarre in its nature, that as he admits at the end - someone had to write a book on it. It is a case of truth stranger than fiction. That cost investors billions, one memorable spring day.
The Flash Crash was an afternoon in 2010 when the financial markets suddenly melted into almost nothing, then bounced back to almost where they started that morning. For a short time (minutes!), shares of major corporations traded for a penny or less, while others shot to $100,000 a share. Blame was needed, and investigations led to a Kansas City financial house which put in a huge sell order, rather inexpertly. But things are never that simple. In this case, it transpired that a single man, working from the edge of his bed in his parents' house in Hounslow outside London, was manipulating the markets, abusing the system until it broke.
Navinder Sarao was in his early thirties and unemployed. He still lived with his parents, and spent his weekdays playing the S&P futures for all they were worth, and more. He would routinely place trades worth billions of dollars, canceling most of them, and walking away with six figures of pure profit for half a day's work.
Bizarrely, he wasn't in it for the wealth. He lived at home, had an ordinary computer, drove a moped, and let no one know what he was doing. His parents, one ill and one working a counter in a store, never knew what he did all day. They had no clue he had run up profits approaching a hundred million dollars from his childhood bedroom. Perhaps even more bizarrely, he proceeded to lose it all on Ponzi schemes and shady con men, and when he was caught, he couldn't make bail or pay lawyers.
Sarao had adapted trading software to stack his orders at the back of their price point, and any time the market traded close by, the software would cancel his orders. So he never had to actually buy. In this way he could make it appear there was either huge demand which would send the market up, or huge selling pressure which would send it down. Either way, he was ready to profit with actual purchase orders he would hold for seconds before cashing out.
None of this is exaggerated. Here's what Vaughn says about Sarao's trading: "By any measure, NAVSAR was an outlier. In the twelve days the CFTC ended up selecting to illustrate the entity’s activity, its layering algorithm canceled or modified orders 182,000 times, corresponding to $35 trillion in notional trades—double the size of America’s gross domestic product. On eight of those days, not a single one of those orders was hit. The size of the orders was also immense: an average of 504 contracts, where the average across the market was seven." Contracts were $75,000 each.
Four years after the event, after every American agency had its crack at assigning blame, a trader looked a the record and proved everyone - including himself - wrong. “I got pretty obsessed,” he (still known as Mr. X today) says. “Based on the data I guessed it had to be the work of a large prop trading firm, maybe with an internal clearing arm to shield it from the authorities. The scale and the audacity of the behavior were so massive I couldn’t imagine it was one individual. As it turned out I was very wrong.” He became a whistleblower, reopening the case just before the statute of limitations kicked in, and that led to Sarao and an international effort to bring him to justice.
Sarao never thought he did anything wrong. He thought of himself as a victim of High Frequency Trading algorithms. This was just him fighting to level the playing field. He proudly videoed his screen while trading (providing hours of fascinating insights for investigators who seized his computer). All these attitudes, approaches, tactics and sheer thoughtlessness, along with crudeness, rudeness and total lack of respect for anyone he dealt with, led to a diagnosis of Aspberger's, once he was in custody. It made some sense out of the crazy story. His math skills were awesome, his instincts spot on, and his reaction time lightning quick. He was a fearless trader, but a failing human being.
The book is fast-paced, extremely engaging, and an easy read, despite the complexity of futures trading. Vaughan has done an excellent job of making it accessible and even exciting. It's a hard one to put down. And it's not over!
In January 2020, after this book was completed and after the American authorities were finally finished with Sarao as a co-operating source, the court finally sentenced him - to two years at home. Not only is this ridiculous for all the damage he did, but it is really all Sarao wanted anyway - to be left alone at home in his familiar bedroom where he was in control and productively engaged. Worse, the US court has no enforcement power in the UK, so the sentence is meaningless. It is the perfect capstone to a story beyond belief.
David Wineberg
Financial investigative journalist Liam Vaughan seems to have had the time of his life putting together Flash Crash. But then, the story is so rich with characters and so bizarre in its nature, that as he admits at the end - someone had to write a book on it. It is a case of truth stranger than fiction. That cost investors billions, one memorable spring day.
The Flash Crash was an afternoon in 2010 when the financial markets suddenly melted into almost nothing, then bounced back to almost where they started that morning. For a short time (minutes!), shares of major corporations traded for a penny or less, while others shot to $100,000 a share. Blame was needed, and investigations led to a Kansas City financial house which put in a huge sell order, rather inexpertly. But things are never that simple. In this case, it transpired that a single man, working from the edge of his bed in his parents' house in Hounslow outside London, was manipulating the markets, abusing the system until it broke.
Navinder Sarao was in his early thirties and unemployed. He still lived with his parents, and spent his weekdays playing the S&P futures for all they were worth, and more. He would routinely place trades worth billions of dollars, canceling most of them, and walking away with six figures of pure profit for half a day's work.
Bizarrely, he wasn't in it for the wealth. He lived at home, had an ordinary computer, drove a moped, and let no one know what he was doing. His parents, one ill and one working a counter in a store, never knew what he did all day. They had no clue he had run up profits approaching a hundred million dollars from his childhood bedroom. Perhaps even more bizarrely, he proceeded to lose it all on Ponzi schemes and shady con men, and when he was caught, he couldn't make bail or pay lawyers.
Sarao had adapted trading software to stack his orders at the back of their price point, and any time the market traded close by, the software would cancel his orders. So he never had to actually buy. In this way he could make it appear there was either huge demand which would send the market up, or huge selling pressure which would send it down. Either way, he was ready to profit with actual purchase orders he would hold for seconds before cashing out.
None of this is exaggerated. Here's what Vaughn says about Sarao's trading: "By any measure, NAVSAR was an outlier. In the twelve days the CFTC ended up selecting to illustrate the entity’s activity, its layering algorithm canceled or modified orders 182,000 times, corresponding to $35 trillion in notional trades—double the size of America’s gross domestic product. On eight of those days, not a single one of those orders was hit. The size of the orders was also immense: an average of 504 contracts, where the average across the market was seven." Contracts were $75,000 each.
Four years after the event, after every American agency had its crack at assigning blame, a trader looked a the record and proved everyone - including himself - wrong. “I got pretty obsessed,” he (still known as Mr. X today) says. “Based on the data I guessed it had to be the work of a large prop trading firm, maybe with an internal clearing arm to shield it from the authorities. The scale and the audacity of the behavior were so massive I couldn’t imagine it was one individual. As it turned out I was very wrong.” He became a whistleblower, reopening the case just before the statute of limitations kicked in, and that led to Sarao and an international effort to bring him to justice.
Sarao never thought he did anything wrong. He thought of himself as a victim of High Frequency Trading algorithms. This was just him fighting to level the playing field. He proudly videoed his screen while trading (providing hours of fascinating insights for investigators who seized his computer). All these attitudes, approaches, tactics and sheer thoughtlessness, along with crudeness, rudeness and total lack of respect for anyone he dealt with, led to a diagnosis of Aspberger's, once he was in custody. It made some sense out of the crazy story. His math skills were awesome, his instincts spot on, and his reaction time lightning quick. He was a fearless trader, but a failing human being.
The book is fast-paced, extremely engaging, and an easy read, despite the complexity of futures trading. Vaughan has done an excellent job of making it accessible and even exciting. It's a hard one to put down. And it's not over!
In January 2020, after this book was completed and after the American authorities were finally finished with Sarao as a co-operating source, the court finally sentenced him - to two years at home. Not only is this ridiculous for all the damage he did, but it is really all Sarao wanted anyway - to be left alone at home in his familiar bedroom where he was in control and productively engaged. Worse, the US court has no enforcement power in the UK, so the sentence is meaningless. It is the perfect capstone to a story beyond belief.
David Wineberg
July 6, 2020
‘Imagine a system where the biggest, most powerful players get to tell the regulators and the exchanges who to go after based on who is taking money off them,’ says one prop trader. ‘Welcome to the futures market.’
Welcome to the big bad world of trading where millions are made and lost in a day.This non-fiction account by journalist Liam Vaughan traces one smart man's genius in bringing the financial markets to it's knees.
Navinder Sarao is the socially awkward trading prodigy who made millions from his small bedroom in his parent's house in UK. Grown from the traditional click and trade trading desks - he finds the game has changed thanks to High Frequency Trading (HFT) programs and algorithms which play on milliseconds of advantage. In a David-vs-Goliath story, Nav builds his own logic which allowed him to take on the giants.
May 6, 2010, trillion dollars of valuation was lost in 3-4 hours of trading. Nav's trading practices was just one reason (5-6 mins), but then he is dubbed as the man who caused flash crash. The book goes beyond that and tells his entire story and the story of the investigation. A lot to learn and the author does a commendable job of simplifying the terminologies without dumbing it down.
Some parts could have been edited like Nav's investments and his advisors who are skimming him. Other than that, it is a complete story and Mr.Vaughan has done a good work of making it a script worthy of a movie.
A well written non-fiction that reads like a novel.
Note: I would like to thank Netgalley and 4th Estate and William Collins for providing the ARC of the book
Welcome to the big bad world of trading where millions are made and lost in a day.This non-fiction account by journalist Liam Vaughan traces one smart man's genius in bringing the financial markets to it's knees.
Navinder Sarao is the socially awkward trading prodigy who made millions from his small bedroom in his parent's house in UK. Grown from the traditional click and trade trading desks - he finds the game has changed thanks to High Frequency Trading (HFT) programs and algorithms which play on milliseconds of advantage. In a David-vs-Goliath story, Nav builds his own logic which allowed him to take on the giants.
May 6, 2010, trillion dollars of valuation was lost in 3-4 hours of trading. Nav's trading practices was just one reason (5-6 mins), but then he is dubbed as the man who caused flash crash. The book goes beyond that and tells his entire story and the story of the investigation. A lot to learn and the author does a commendable job of simplifying the terminologies without dumbing it down.
Some parts could have been edited like Nav's investments and his advisors who are skimming him. Other than that, it is a complete story and Mr.Vaughan has done a good work of making it a script worthy of a movie.
A well written non-fiction that reads like a novel.
Note: I would like to thank Netgalley and 4th Estate and William Collins for providing the ARC of the book
May 15, 2020
Flash Crash is probably not the brightest book to opt to read when our economy is shrinking seismically due to our current predicament. It feels very ironic to be publishing it right now when it couldn't be be any more relevant and timely. Of course the reasoning is very different from the flash crash of May 6, 2010. Many of the missing details have been filled in by the author and it is clear he has carried out extensive research into the topic. It quickly emerges as a real and quite surprising page-turner.
It explores the issues that led up to one of the contemporary United States’s most devastating trillion-dollar stock market crashes in history lasting a mere 36 minutes with a significant portion of the blame being laid at the door of British financier Navinder Singh Sarao. He was arrested for market manipulation but was only sentenced to a year of house arrest due to his cooperation with authorities.he appears to have been made an example of given his crimes are the same crimes being committed by traders to this day with no repercussions.
I have to admit that at times this felt like fiction; in fact it felt like a political/economic thriller with some incredible tension and a building up of suspense and unlike most nonfiction I raced through quite a few of the interesting sections; it's a testament to Vaughan's writing skills that it read so easily. It’s fascinating, well informed and will appeal to a wider audience than just those with an interest in the stock market. The writing is fluid and the whole book is a compulsively readable rollercoaster of peaks and troughs along the way. The perfect phrase to accompany this book? The truth really is stranger than fiction...
It explores the issues that led up to one of the contemporary United States’s most devastating trillion-dollar stock market crashes in history lasting a mere 36 minutes with a significant portion of the blame being laid at the door of British financier Navinder Singh Sarao. He was arrested for market manipulation but was only sentenced to a year of house arrest due to his cooperation with authorities.he appears to have been made an example of given his crimes are the same crimes being committed by traders to this day with no repercussions.
I have to admit that at times this felt like fiction; in fact it felt like a political/economic thriller with some incredible tension and a building up of suspense and unlike most nonfiction I raced through quite a few of the interesting sections; it's a testament to Vaughan's writing skills that it read so easily. It’s fascinating, well informed and will appeal to a wider audience than just those with an interest in the stock market. The writing is fluid and the whole book is a compulsively readable rollercoaster of peaks and troughs along the way. The perfect phrase to accompany this book? The truth really is stranger than fiction...
July 7, 2020
3.5
My biggest takeaway: Automation is the key!
This book details on how the markets suddenly crashed in May 2010 for around 30 mins, and then came back to normal. The main culprit - using automated algorithms to manipulate and execute huge transactions within nanoseconds!
Loved this quote:
“One day, years from now,” a trading desk “will typically consist of three things. A man, a dog, and a computer. The computer’s job will be to trade. The man’s job will be to feed the dog. The dog’s job will be to bite the man if he goes anywhere near the computer.”
My biggest takeaway: Automation is the key!
This book details on how the markets suddenly crashed in May 2010 for around 30 mins, and then came back to normal. The main culprit - using automated algorithms to manipulate and execute huge transactions within nanoseconds!
Loved this quote:
“One day, years from now,” a trading desk “will typically consist of three things. A man, a dog, and a computer. The computer’s job will be to trade. The man’s job will be to feed the dog. The dog’s job will be to bite the man if he goes anywhere near the computer.”
July 5, 2020
The story need to be told. Kudos to the author for explaining industry specific jargon in lay terms. However, the author dragged the story with unnecessary details by explaining the background of many people involved in this case. This slow down the momentum of the story.
The author captured the flash crash incident very well.
The author captured the flash crash incident very well.
July 3, 2020
A nonfiction thriller. A deeply satisfying read. The balance of the technical with the personal was brilliantly achieved. I would highly recommend you to read this story of a lone extraordinary man bringing down the market on its knees. Morality and ethics aside, the victory of a small man against the highly powerful and sophisticated HFTs is an intoxicating read.
August 13, 2021
I have read quite a few books about the stock market at this point and this one slots in well. This one is a lot more focused on one individual and uses that frame to explore bigger failures of trading and the stock market. I tend to enjoy books that work like this and it worked for me here. I was familiar with some of the ideas already, particularly there was crossover with Flash Boys: A Wall Street Revolt by Michael Lewis, which this book does call out by name. However, even when this crossover, I found the new information and personal story in this book interesting.
I listened to this as an audiobook and it was a very quick listen. It's also read by the author and I almost always like that and I think he did a good job here. I found all the information presented in this book to be easily accessible and comprehensible while listening without reading along which I don't always find to be true.
I would recommend this as a short, interesting financial tale. Even if you haven't read other books about the stock market, I think you'll find this interesting and accessible.
I listened to this as an audiobook and it was a very quick listen. It's also read by the author and I almost always like that and I think he did a good job here. I found all the information presented in this book to be easily accessible and comprehensible while listening without reading along which I don't always find to be true.
I would recommend this as a short, interesting financial tale. Even if you haven't read other books about the stock market, I think you'll find this interesting and accessible.
June 13, 2020
3.5. It’s very entertaining and fast-reading but like a long article. Some context was lacking, as was Navinder Sarao’s own take on what he did, although that’s excusable as he hadn’t been sentenced yet. Still, when he’s quoted it’s intriguing enough to make you curious about what else he has to say.
It does learn you a thing or two about the markets and the insane lack of regulation and the dinosaur technology regulators have compared to the high-tech tricksiness traders employ. Like well we would LOVE to know when someone does something naughty but it all happens in a billionth of a second and we can’t monitor every single little thing so whatcha really gonna do about it? Just keep on keeping on til somebody pulls the rug out from under it all, I guess! When that someone has amassed $70 million while executing these trades from his childhood bedroom and then loses all his money in a Ponzi scheme it does make for a good story though.
It does learn you a thing or two about the markets and the insane lack of regulation and the dinosaur technology regulators have compared to the high-tech tricksiness traders employ. Like well we would LOVE to know when someone does something naughty but it all happens in a billionth of a second and we can’t monitor every single little thing so whatcha really gonna do about it? Just keep on keeping on til somebody pulls the rug out from under it all, I guess! When that someone has amassed $70 million while executing these trades from his childhood bedroom and then loses all his money in a Ponzi scheme it does make for a good story though.
September 4, 2020
I was in my college when this flash crash occured and I can say, I was clueless at that time about this recession. Then I forgot about it. But when I started reading this book, I found this original story quite interesting. I googled about Nav side by side. The beginning and the end part of the book is good. I had to drag the book in the middle. Nav was a genius and I liked how he used his mind when he was doing trading positively. He was making millions already, enjoying his game, I don't know why he asked to make a software and did fraud. He was not even spending that money on anything but on trading itself. He was just like, how video game players like to find cracks and cheats of their game, he had just done that. Curious to know whether in future, he will do something genius-like again in a postive way.
September 15, 2020
Flash Crash is a business book recently longlisted for Financial Times and McKinsey Business Book of the Year Award 2020. It was published in May and quickly got media’s attention. It’s a page-turner with real-life story that is more exciting than fictions. It’s hard to put down once you start reading. This is a perfect example of story-driven narrative that offers fresh insights at the same time. If you have ever read books by Michael Lewis (author of The Big Short, Flash Boys, etc) and you like his writing. This book will not let you down.
The author of the book is Liam Vaughan. He is a veteran business journalist for Bloomberg based in London. He has covered the financial market, especially the London financial world, for over a decade. His journalistic works are impactful and has won several journalistic awards. Flash Crash is his second book. The first book The Fix focuses on the notorious Libor scandal. It tells the conspiracy how Libor rate was manipulated by a small group of insiders. Libor rate is one of the most important interest rates in the world because it is the reference for international foreign exchange market. Over $5 trillion are traded everyday globally. The scale of impact is beyond imagination. Liam led a group of reporters to uncover the scandal and resulted in 10 billion dollars fines on several major investment banks. It sounds unbelievable, right? Actually, the story of Liam’s second book Flash Crash may seem even more crazy. The Libor scandal was the result of a group of people. However, the story of Flash Crash centered on one person.
The protagonist (or antagonist in this case) was Navinder Sarao, a point-and-click trader based in a London suburb (Hounslow, West London) near Heathrow Airport. He was allegedly to cause one of the most dramatic stock market crashes in human’s history. On 6 May 2010, American stock market suddenly plunged deeply without warning. It led to one-trillion-dollar loss but quickly rebounded after 36 minutes. The notional amount of Sarao’s manipuation exceeded 35 trillion dollars, two times larger than America’s GDP. When Sarao was arrested in 2015, everyone was asking fervidly…Who is this guy?
Nicked named ‘Hound of Hounslow’, an analogy to the ‘Wolf of Wall Street’, Sarao is now 42 years old. He was thought to earn $40 million from 2009 to 2015. He is a self-taught genius on investment. He doesn’t have any shining educational degree or working experience. In the world of high frequency trading, he scammed the most advanced computer algorithm single-handedly. You might think he was equipped with super weapon. Surprisingly, he did all this in a bedroom in his parent’s ordinary two-story residence house. Sarao’s bedroom smelled a bit moldy. The room was messy. There was even a stuffed tiger doll (size of a Labrador!) in the room. At the end of his single-size bed, there was a normal computer connected to three screens. This computer was the kind that everyone could easily buy one at any stores. It blowed investigators’ mind. They didn’t expect this shabby place was the ground zero of ‘flash crash’. It turned out Sarao actually fooled the whole world from here, thousands of miles away from Wall Street. You must feel curious. How did pull this stunt?
The technique he used is called ‘spoofing’, an illegal investment manipulation technique. The logic is simple. Sarao placed a very large order on either buy or sell side and other investors would follow like a herd. Sarao observed others (including computers) took similar investing strategy. He did the reverse engineering and set up an easy automation program to place false orders. The program would cancel the orders just before execution and then quickly place the ‘real’ orders to reap the benefits. That is, other investors would still execute the orders that Sarao wanted them to place. It made price increase or decrease. Therefore, Sarao could earn the difference between the prices.
After the flash crash, everyone was discussing what actually happened. Scholars did academic research. Investment experts shared opinions. Some people accused computers of disrupting market… No one knew the answer. The US Government set up special unit to investigate the incident. It took 5 years to trace the origin to Sarao. Sarao was extradited to the USA and faced up to 380 years in prison. What followed was another surprising turn of the story. Sarao was diagnosed with Asperger’s syndrome. He played the market like playing a computer game. He didn’t know or care how to spend the money. In fact, he lost most of the money to con artists who cheated him into bad investment projects. Sarao was a genius in investment world, but he couldn’t take good care of himself in the real world. He cooperated well with American Government and taught them insider’s wisdom. This led to convictions of several other fraudsters. Sarao made great contributions for redemptions.
In the end, Sarao was sentenced one year at home in the custody of his parents. He was grounded for one year after causing flash crash. The spectacular rise and fall of Sarao is so dramatic that is hard to believe. In fact, the story is now being adapted into a film by an Oscar-winning production company. Flash Crash is an allegory for every professional in the business world. It showcases the importance of integrity and trust in the financial market. It’s also an alarming call for cyber crimes. It will certainly give readers new ideas about uncertainty.
The author of the book is Liam Vaughan. He is a veteran business journalist for Bloomberg based in London. He has covered the financial market, especially the London financial world, for over a decade. His journalistic works are impactful and has won several journalistic awards. Flash Crash is his second book. The first book The Fix focuses on the notorious Libor scandal. It tells the conspiracy how Libor rate was manipulated by a small group of insiders. Libor rate is one of the most important interest rates in the world because it is the reference for international foreign exchange market. Over $5 trillion are traded everyday globally. The scale of impact is beyond imagination. Liam led a group of reporters to uncover the scandal and resulted in 10 billion dollars fines on several major investment banks. It sounds unbelievable, right? Actually, the story of Liam’s second book Flash Crash may seem even more crazy. The Libor scandal was the result of a group of people. However, the story of Flash Crash centered on one person.
The protagonist (or antagonist in this case) was Navinder Sarao, a point-and-click trader based in a London suburb (Hounslow, West London) near Heathrow Airport. He was allegedly to cause one of the most dramatic stock market crashes in human’s history. On 6 May 2010, American stock market suddenly plunged deeply without warning. It led to one-trillion-dollar loss but quickly rebounded after 36 minutes. The notional amount of Sarao’s manipuation exceeded 35 trillion dollars, two times larger than America’s GDP. When Sarao was arrested in 2015, everyone was asking fervidly…Who is this guy?
Nicked named ‘Hound of Hounslow’, an analogy to the ‘Wolf of Wall Street’, Sarao is now 42 years old. He was thought to earn $40 million from 2009 to 2015. He is a self-taught genius on investment. He doesn’t have any shining educational degree or working experience. In the world of high frequency trading, he scammed the most advanced computer algorithm single-handedly. You might think he was equipped with super weapon. Surprisingly, he did all this in a bedroom in his parent’s ordinary two-story residence house. Sarao’s bedroom smelled a bit moldy. The room was messy. There was even a stuffed tiger doll (size of a Labrador!) in the room. At the end of his single-size bed, there was a normal computer connected to three screens. This computer was the kind that everyone could easily buy one at any stores. It blowed investigators’ mind. They didn’t expect this shabby place was the ground zero of ‘flash crash’. It turned out Sarao actually fooled the whole world from here, thousands of miles away from Wall Street. You must feel curious. How did pull this stunt?
The technique he used is called ‘spoofing’, an illegal investment manipulation technique. The logic is simple. Sarao placed a very large order on either buy or sell side and other investors would follow like a herd. Sarao observed others (including computers) took similar investing strategy. He did the reverse engineering and set up an easy automation program to place false orders. The program would cancel the orders just before execution and then quickly place the ‘real’ orders to reap the benefits. That is, other investors would still execute the orders that Sarao wanted them to place. It made price increase or decrease. Therefore, Sarao could earn the difference between the prices.
After the flash crash, everyone was discussing what actually happened. Scholars did academic research. Investment experts shared opinions. Some people accused computers of disrupting market… No one knew the answer. The US Government set up special unit to investigate the incident. It took 5 years to trace the origin to Sarao. Sarao was extradited to the USA and faced up to 380 years in prison. What followed was another surprising turn of the story. Sarao was diagnosed with Asperger’s syndrome. He played the market like playing a computer game. He didn’t know or care how to spend the money. In fact, he lost most of the money to con artists who cheated him into bad investment projects. Sarao was a genius in investment world, but he couldn’t take good care of himself in the real world. He cooperated well with American Government and taught them insider’s wisdom. This led to convictions of several other fraudsters. Sarao made great contributions for redemptions.
In the end, Sarao was sentenced one year at home in the custody of his parents. He was grounded for one year after causing flash crash. The spectacular rise and fall of Sarao is so dramatic that is hard to believe. In fact, the story is now being adapted into a film by an Oscar-winning production company. Flash Crash is an allegory for every professional in the business world. It showcases the importance of integrity and trust in the financial market. It’s also an alarming call for cyber crimes. It will certainly give readers new ideas about uncertainty.
August 27, 2023
I have always knew American judiciary system skewed towards the large corporates. I don’t understand how the front running is not illegal while spoofing is. A good book to understand the difficulties and challenges of a prop trader in the times of HFTs and ML tools for trading. I would suggest to read Flash boys by Michael Lewis along with this one to understand the complete picture.
April 5, 2021
Pretty interesting story of Nav Sarao who took on the HFTs and exploited spoofing strategy. The story around prosecuting him was quite dry and sounded small fry from the start
May 1, 2023
This was an extremely interesting account of a British day trader who made millions trading on the Chicago Mercantile Exchange using controversial and illegal stratagems and contributed to the mysterious flash crash of 2010. I vaguely remember it being reported at the time but I had no idea that the case was as strange and extraordinary as it was. The central figure is not your stereotypical, loads of money, brash city trader but someone on the spectrum, who lives with his parents in his childhood home. This is the story of how he was brought to book by the US authorities. There are so many fascinating elements to this tale. Vaughan does a good job of explaining what Sarao did and how it did it and is very even handed. Highly recommended.
April 28, 2021
I enjoyed this as a narrative book. Flash Crash is an interesting book that talks about Nav Sarao, a day trader in London who was (sort of) scapegoatted for the 2010 "Flash Crash."
If you like Michael Lewis type books (Spider Network, Black Edge, Billion Dollar Whale, Flash Boys), you'll probably love this if you haven't read it already. If not, it's probably a bit dull and esoteric despite the promises of "global manhunt" and "most mysterious market crash in history. OooooooooO." Computers and frontrunning, that's the mystery.
I think it's a really difficult task to describe the Rube Goldberg on LSD makeup of the current global financial markets, and Liam does a good job fitting this story to a narritave. But I would be extremely wary at how simple he makes it sound. There are many, many, many (you get it) books written about concepts that Liam glosses over. International Tax Evasion, regulatory overlap, market structure, to name a few that I am briefly familiar with.
Read it for fun, not for education.
If you like Michael Lewis type books (Spider Network, Black Edge, Billion Dollar Whale, Flash Boys), you'll probably love this if you haven't read it already. If not, it's probably a bit dull and esoteric despite the promises of "global manhunt" and "most mysterious market crash in history. OooooooooO." Computers and frontrunning, that's the mystery.
I think it's a really difficult task to describe the Rube Goldberg on LSD makeup of the current global financial markets, and Liam does a good job fitting this story to a narritave. But I would be extremely wary at how simple he makes it sound. There are many, many, many (you get it) books written about concepts that Liam glosses over. International Tax Evasion, regulatory overlap, market structure, to name a few that I am briefly familiar with.
Read it for fun, not for education.
September 14, 2020
Wow, what a story! This is a real piece of investigate journalism. The story of Nav and his role in the 2010 Flash Crash was quite extraordinary. One introverted man in a poor area in London was able to crash an entire financial market with a mouse, line of code and a McDonald’s burger. Nav exposed the true corrupt and unethical groundings in which the global financial system has been built upon whereby institutional ‘whales’ are able to dictate supply and demand movements, to the detriment of hardworking retail investors. Ultimately, although Nav’s story is a tad unfortunate, it was written with humour and thrill whereby I consistently wanted to know more. Very well written Liam Vaughan!
March 19, 2020
This was a delightful read. I know little about stock markets, but Vaughan makes the subject very interesting. He explains different techniques for trading in ways that even I can understand. Navinder and the people he surrounded himself with were very interesting to read about. The ending actually kind of surprised me and made me smile.
This book was a great mix of biography and story-telling. It never really felt dry and there always seemed to be some kind of interesting drama happening.
This book was a great mix of biography and story-telling. It never really felt dry and there always seemed to be some kind of interesting drama happening.
December 3, 2020
Well written. Every page is full of gems, and includes many interesting findings by the author's original research on how Nav Sarao went to make many millions reading the 'ladder' (a stock exchange's order book) and optimized his trading strategy. I was unable to stop reading it. I even read it during work breaks.
February 25, 2022
Well researched and well written this true story of a math genius making millions from the stock market was intriguing. The lines are blurred between right and wrong and if you are familiar with investing and high frequency trading you might conclude he did nothing wrong or perhaps quite the opposite. Some nice little twists the last few chapters too. This was just as good as “FLASH BOYS”
May 13, 2022
A brilliant recount of exactly how the system is rigged, how the powerful elite escape scrutiny, despite the depths of their own involvement. The deeper meaning is simple, yet sad: The Rule of Law is known worldwide. Yet in every known financial scandal ever perpetrated this same rule of law is nonexistent, to suggest that Nav was subject to the same laws as all his peers, both from the HFT bigwigs to the big bank traders is laughable.
Brilliantly researched and presented, one cannot help but to rush to Nav's corner and support the underdog.
As good as Flash Boys and The Big Short.
Brilliantly researched and presented, one cannot help but to rush to Nav's corner and support the underdog.
As good as Flash Boys and The Big Short.
May 17, 2020
A decent read about the how manipulative the financial market truly is, as well as some of the ponzi schemes used by some HFT quants. One of the tactics used includes fake buy/sell limit orders on the Level 2. A highly recommended read for all market participants.
February 24, 2022
A very interesting read about how the flash crash was (rightly or wrongly) attributed to one man, trading from his bedroom in his parents house. Having never traded, this book gives a valuable insight into that world and how easily the market can be manipulated.
September 18, 2024
Quite a good book that gave me an insight into trading as a job rather than the overly complex task it looks like from the outside. Author did a good job of breaking that down.
The book hit a lull right around the middle, but picks back up in the last third.
The book hit a lull right around the middle, but picks back up in the last third.
March 28, 2021
Another highly entertaining yet educating and insightful financial crime story. Can recommend!
December 15, 2021
In the end, reader of this book will definitely utter " holy mac n cheese" in amazement.
August 21, 2022
Really interesting book! I was surprised at the detailed yet easily understandable analysis and enjoyed every part of it
Read
April 11, 2024it's a straightforward story, though with more details than the video summaries you see on social media. it is entertaining, but if you came for something to learn, this is not it.
July 10, 2020
Zen mode low profile Prop Trader beating the HFTs and Hedge Funds to losing on Ponzi schemes. This has to made into a Movie.
February 21, 2022
Kid with Asperger’s from West London fools the algos, makes millions and does it all from the bedroom he’s never left in his parents’ house..
There’s so much to rail against, not least of which is the crime of spoofing which Nav Sarao commits - but yet..
Brilliantly told story about a subject in which I have a very real interest. If more stars were available, would gladly provide them!
There’s so much to rail against, not least of which is the crime of spoofing which Nav Sarao commits - but yet..
Brilliantly told story about a subject in which I have a very real interest. If more stars were available, would gladly provide them!
This entire review has been hidden because of spoilers.
April 10, 2020
I love stories that have to do with odd crimes, or of odd happenings in the US.
I was excited to see this was up for grabs as an ARC.
I know little to nothing of stocks or how stocks actually work, but I want to thank Liam Vaughan for explaining it and in such a way that makes sense that helped me follow along with what Nav was doing and what everyone around him was getting into.
The story itself is simple: college kid decides to find a job, job ends up being trading/selling stocks for a company, kid ends up being really smart with numbers and algorithms that he goes off on his own. There, he treats the entire thing like an unbeatable video game - he has to keep raking up money to the point where he has no limits just to see how high he could go. Crazy enough he never spent any of it, he just keeps putting it into savings.
I really don't have a reason why I rated it down a star. Maybe because I expected more drama? Or more entanglements? Though Mr. X is salty and I give him credit for going in there and figuring out what Nav was up to.
I was excited to see this was up for grabs as an ARC.
I know little to nothing of stocks or how stocks actually work, but I want to thank Liam Vaughan for explaining it and in such a way that makes sense that helped me follow along with what Nav was doing and what everyone around him was getting into.
The story itself is simple: college kid decides to find a job, job ends up being trading/selling stocks for a company, kid ends up being really smart with numbers and algorithms that he goes off on his own. There, he treats the entire thing like an unbeatable video game - he has to keep raking up money to the point where he has no limits just to see how high he could go. Crazy enough he never spent any of it, he just keeps putting it into savings.
I really don't have a reason why I rated it down a star. Maybe because I expected more drama? Or more entanglements? Though Mr. X is salty and I give him credit for going in there and figuring out what Nav was up to.
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