Episode 34: Liam Vaughan
Listen to Episode on:
Watch the Unabridged Interview:
Order Books:
Heroes and Villains: Stories Behind the Flash Crash
On May 6, 2010, the global financial markets went into a tailspin suddenly and simultaneously. The event was known as the “Flash Crash,” the fastest drop in stock market history. Reports document a loss of a trillion dollars in valuation that occurred in just five minutes. Liam Vaughan, an investigative reporter with Bloomberg and Businessweek magazine in London, talks about this in his book Flash Crash.
Listen as Liam and Greg talk about Navinder “Nav” Singh Sarao, the bedroom day trader who would make and lose millions during this time. Get to know this gifted trader who played the markets like a computer game. We’ll also learn about Jesus Alejandro Garcia Alvarez, the Mexican businessman claiming to have extensive property holdings in South America. Take notes on the parallels to Tom Hayes and Bernie Madoff, and don’t miss out on Liam’s thoughts about the role of regulators in preventing and solving these financial crises.
Episode Quotes:
What motivated you to write the book?
“So, I was working as a beat reporter at Bloomberg Finance in London when the Flash Crash happened. There wasn't even a Bloomberg yet. I think I joined in 2011. It was an event that I was aware of as a financial reporter, but didn't pay a huge amount of attention to it at the time. Five years later, in 2015 when there was an arrest. The idea that this guy 一 on his own could potentially cause this global financial crash just seems surprising perplexing. And then gradually, over time, information about who he was started to emerge. This was a guy who was operating out of his childhood bedroom at his parent's house underneath the flight path of Heathrow Airport. He never really worked at a major financial institution. He taught himself to trade, wore a tracksuit, and swore like a sailor. And yet, when they arrested him, he was worth $70 million.”
In context to what happened with the Robinhood App, why is this narrative of little guys going up against the big hedge funds so appealing to people?
“There are some on that Reddit forum that made a lot of money and lots of people that didn't make any money. Maybe they're quite sophisticated. The people who made a lot of money, like the main guy, I believe he's like a sort of investment professional. Or, hedge fund players were either jumping on the back of or exacerbating the moves and made more money than the Robin Hood traders did at all… What I find fascinating is how the government and the regulators will be able to grapple with this because it seems like what we were talking about earlier. The manipulation rules might not be fit for purpose.”
Why was there so much support for #FreeNav? In this story, how does the narrative of David vs. Goliath come into play?
“The thing about Nav's story, it just was so rich because he always argued that the system was unfair. When he was arrested, he was socially after the Michael Lewis book talking about the HFT techniques and the idea that the markets were rigged. But that wasn't superimposed after the event. He genuinely believed that he was fighting against this kind of corrupt system.”
Show Links:
Guest's Profile:
His Work: