Flash Crash (Liam Vaughan)

Trader's Library #76 · Market history, crises and scandals. A thriller about the index futures order book: required reading for a futures trader.

Author: Liam Vaughan · Original: Flash Crash: A Trading Savant, a Global Manhunt, and the Most Mysterious Market Crash in History · Year: 2020 · Usefulness for traders: ★★★★★

What it's about

The story of Navinder Singh Sarao, a trader from suburban London who traded E-mini S&P 500 futures from a room in his parents' house and was accused of contributing to the “flash crash” of 6 May 2010, when the US market fell almost 10% in minutes and quickly rebounded.

What it gives a trader

The book in the whole Library closest to an MYM trader: index futures, the order book, large orders that appear and disappear – in other words, spoofing. It shows that not all liquidity in the DOM is real, and how regulators view order-book manipulation.

Lessons for traders

• orders visible in the book aren't necessarily real
• in moments of panic, liquidity disappears in seconds
• order-book manipulation is a crime and is prosecuted
• talent without rules and oversight ends in disaster

What to watch out for

Sarao's role in the flash crash is disputed: official reports pointed to other causes too. The book is reportage, not technical analysis.

Discussion

The discussion takes place in Hetman Capital Club (in Polish). Join the discussion in the Club →

Navigation

← #075 The Big Short (Michael Lewis) · Library index · #077 Extraordinary Popular Delusions and the Madness of Crowds (Charles Mackay) →

Educational content, not investment advice. The book description is my own summary and assessment, not quotations. Edition details were checked in catalogues and bookshops, and where there was doubt I said so plainly.