Wednesday, 29 January 2020

US court passes comedy sentence

From City AM:

British trader Navinder Sarao who was responsible for the so-called flash crash in 2010 has been sentenced to one year home incarceration. Sarao was arrested in 2015 and pleaded guilty to illegally manipulating the stock markets.

The sentence, which was handed down by a Chicago court yesterday, was thrown into doubt after lawyers said it would be unenforceable (1) outside the US, according to The Guardian.

Following recess, Judge Virginia Kendall of the northern district of Illinois, was satisfied Sarao would only be allowed to leave the house in a handful of circumstances (2). 

1. Of course it is not enforceable if Mr S is outside the UK.

2. I got the impression that Mr S is a computer geek who is perfectly happy staying at his parents' house 24/7, he now has a good excuse when his Mum tells me to go outside and get some fresh air or meet a nice girl. He probably punched the air and shouted "Yes!". Unless Judge Kendall ruled that his Mum can decide what those circumstances are?

3. Mr S was entirely innocent anyway, so this is a neat way of letting him off the hook.


Dinero said...

From the London Stock Exchange rule book
Share price manipulation[1410]G1410A member firmtrading in a security shall not do any act or engage in any course of conduct the sole or main intention of which is to move the price of that security or the level of any indexof which that security is a component.Guidance to Rule:Rule 1410 does not preclude a member firmfrom pursuing a bona fide trading strategy, as principal or on behalf of customers, or from effecting trades in the normal course of its business. However, in all cases, a member firmshould ensure that it is in a position to be able to justify to the Exchange that, in effecting a trade or pursuing a particular trading strategy, it acted in pursuit of a bona fide commercial purpose.The Exchange is likely to seek further information and detailed explanations froma member firmin respect of any activity that appears to amount to a breach of rule 1410. Examples of activity that may lead the Exchangeto seek further information from a member firminclude, but are not limited to, instances where:•in executing a customerorder based on a reference price of a security, a member firmsubmits a number of comparatively small orders, shortly before the reference point, which are not proportionate to previous, related business by the member firmand appear to be intendedto profit the member firmat the customer’sexpense;•towards the striking or expiry of a hedged derivative position, a member firmtrades in the cash market beyond the level required to set up or unwind the hedge and thisappears to be done principally in order to benefit the firm’s derivative position;•a member firmwith a partially hedged, or un-hedged, OTC futures or options position, trades in the cash market, apparently uneconomically in respect of that cashbusiness, but to the benefit of the OTC position; or•a member firmaccepts an order from a customer, where the customer’sstated intention is to move the price of a security or value of an index(this would include a situation where, for example, a customerinstructs a member firmto ensure that an indexcloses above a certain level).Additional guidance for closing auctionsIn executing a trade to achieve the closing price for a customer, member firmsmay wish to use a market order in the closing auction. Amember firmmay also enter a priced order on the other side of the order bookif this represents genuine trading interest. This would not of itself constitute a breach of rule 141.
Rule book Continues.

Dinero said...

From the US Securities and exchange Act 1834

PROHIBITION AGAINST MANIPULATION OF SECURITY PRICESSEC. 9. (a) It shall be unlawful for any person, directly or indi-rectly, by the use of the mails or any means or instrumentality of interstate commerce, or of any facility of any national securities ex-change, or for any member of a national securities exchange—(1) For the purpose of creating a false or misleading appear-ance of active trading in any security other than a government se-curity, or a false or misleading appearance with respect to the mar-ket for any such security, (A) to effect any transaction in such secu-rity which involves no change in the beneficial ownership thereof, or (B) to enter an order or orders for the purchase of such security with the knowledge that an order or orders of substantially the same size, at substantially the same time, and at substantially the same price, for the sale of any such security, has been or will be entered by or for the same or different parties, or (C) to enter any order or orders for the sale of any such security with the knowledge that an order or orders of substantially the same size, at substan-tially the same time, and at substantially the same price, for the

Dinero said...

(5) For a consideration, received directly or indirectly from a broker, dealer, security-based swap dealer, major security-based swap participant, or other person selling or offering for sale or pur-chasing or offering to purchase the security, a security-based swap, or security-based swap agreement with respect to such security, to induce the purchase of any security other than a government secu-rity, any security not so registered, any security-based swap, or any security-based swap agreement with respect to such security by the circulation or dissemination of information to the effect that the price of any such security will or is likely to rise or fall because of the market operations of any 1 or more persons conducted for the purpose of raising or depressing the price of such security.

Dinero said...

(6) To effect either alone or with one or more other persons any series of transactions for the purchase and/or sale of any security other than a government security for the purpose of pegging, fixing, or stabilizing the price of such security in contravention of such rules and regulations as the Commission may prescribe as nec-essary or appropriate in the public interest or for the protection of investors.
Sec. 9SECURITIES EXCHANGE ACT OF 1934 (b) It shall be unlawful for any person to effect, in contraven-tion of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protec-tion of investors—(1) any transaction in connection with any security where-by any party to such transaction acquires—(A) any put, call, straddle, or other option or privilege of buying the security from or selling the security to an-other without being bound to do so; (B) any security futures product on the security; or (C) any security-based swap involving the security or the issuer of the security;
Act continues.

Mark Wadsworth said...

Din, first comment. Mr S is not a "member firm" of the LSE so that doesn't apply to him.

Other comments, US laws are not binding on UK residents in the UK.