The Catholic University of America



David Lipton


Professor David Lipton Interviewed by Bloomberg Law about “Flash Crash” of 2010

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Catholic University law school Professor David Lipton, who directs the Securities Law Program at CUA, was among two expert guests featured on Bloomberg Law’s radio program on April 22. Lipton shared his perspectives on the manipulative activities and ultimate arrest this month of Nav Sarao, a lone high-frequency computerized trader located in London but who traded in futures on the Chicago Mercantile Exchange, which impacted upon the U. S. market.   

Program host June Grasso focused on the impact of Sarao’s trading on the famed "flash crash" of May 6, 2010, where the Dow Jones Industrial Average fell by approximately 600 points in a five-minute period, following a drop in the price of E-Mini S&P 500 futures contracts.
Lipton noted for the program’s audience that Sarao’s manipulative practices were broader in scope than a single event, extending over a five year period from 2009-2014. The charges brought against him do not appear to suggest that he created the flash crash, but rather that he exacerbated it and moved the market down on several other occasions. 
During the program, Lipton also explained "spoofing" or "layering," terms which describe Sarao’s ability to use inexpensive retail software to place sell orders without ever having the trades executed. In essence, Sarao repeatedly pushed down the price of a broad range of securities, impacted upon by his "spoofing," and he gained a financial benefit (estimated in the criminal complaint issued against him by the FBI at approximately $40 million over five years) by appearing to purchase at the other end.  
“Although he was on the radar of regulators as far back at 2010, it remains surprising that no action was taken against this trader until this week,” Lipton commented.
The United States is seeking extradition of the 36 year-old trader. Lipton’s fellow guest on the Bloomberg radio program was Michael Greenberger, Professor at the University of Maryland Francis King Carey School of Law.