The circumstances surrounding the arrest of Navinder Sarao for his actions related to the Flash Crash have been covered widely, but there is one angle that seems to be slipping through the cracks: Sarao’s intent. Or more precisely, his lack of intent.

Considering the volume of trade orders Sarao is alleged to have placed and then canceled, it seems likely his intention was to manipulate the market. And if Sarao ever stands trial and it is proven that he was “spoofing” or manipulating the market in some other way, then he should be punished accordingly.

However, I find it hard to believe Sarao woke up on the morning of May 6, 2010, and said to himself, “Today I am going to crash the market, drive shares of Accenture to one cent, raise Apple shares to more than $100,000 and then call it a day.” In fact, his actions after the Flash Crash suggest he had no idea his trades played such an allegedly large role in the day’s events. (read more…)

CME Group’s latest marketing effort focuses on the global energy, financial and agricultural markets, highlighting how the exchange group empowers customers in these industries with the capabilities to effectively manage risk and maximize opportunities.

One of CME Group’s recent successes is in the cocoa futures market. Since launching its euro-denominated cocoa contract three weeks ago, CME Group has traded more than triple what Intercontinental Exchange has transacted. Volume was 1,562 contracts, compared with 463 traded by ICE.

In the energy markets, a more traditional area where CME Group is looking to help businesses manage risk is oil prices. The exchange’s OpenMarkets news and analysis website published a piece this week that dives into how businesses could have utilized derivatives to help weather the recent plunge in oil prices.

CME Group has also added content to its microsite — cmegroup.com/advance — providing the latest insights into global market trends based on industry data. (read more…)

Just wrapped up a week in sunny San Diego covering the SIFMA Ops conference. Hours and hours of great speakers and insights. A few observations:

SEC Commissioner Kara Stein is ambitious: As covered earlier this week on this site, Stein wants to revolutionize the way data is gathered and analyzed at the SEC. She sounds a lot like Scott O’Malia did during his days at the CFTC. O’Malia didn’t bring the CFTC up to speed before he left for ISDA. Given the budgetary and political landscape, the odds seem long that Stein will have any better luck at the SEC before she departs for her next gig.

If Richard Berner shouted in a forest and no one was around, would he make a sound?: Berner and the team at the Office of Financial Research are doing tremendous work. They produce great research and analysis, but I am just not sure how many people are reading it. (read more…)

According to Richard Berner, the director of the Treasury Department’s Office of Financial Research, the financial crisis exposed critical gaps in the data, analysis and policy tools required to ensure financial stability. Berner should know, because his office was created via the Dodd-Frank Act to provide a place where varied research related to financial markets could be collected, studied and shared.

Berner took to the stage this week at the 42nd Annual SIFMA Operations Conference and Exhibition and highlighted one specific initiative he deemed “critical” to enhancing financial stability: the global adoption of legal entity identifiers.

“The global LEI is the cornerstone for financial data standards,” Berner said. “Had the LEI system been in place in 2008, the industry, regulators, and policymakers would have been better able to trace Lehman’s exposures and connections across the financial system.”

As a tool, Berner said LEIs represent a key starting point for the OFR as it works to better understand the complexities of financial markets. (read more…)

SEC Commissioner Kara Stein has no qualms dissecting the role data plays in today’s financial markets. If anything, she seems to be making it her mission to educate anyone who will listen about the conflicting roles data can play in today’s markets: Data can empower beautiful market efficiencies and enhance beastly market disruptions.

“Data revolution represents dramatic changes in securities markets operations,” Stein said Tuesday at SIFMA’s 42nd Annual Operations Conference in San Diego.

Before outlining the data-related initiatives she deems crucial, Stein offered a brief history of the markets, detailing the evolution of market data from the days of the Buttonwood tree to today’s high-frequency trading superhighways. Ultimately, Stein urged caution about the ramifications of analysis and regulation not keeping pace with microwave- and laser-fast markets, noting “The Flash Crash demonstrated that markets had outpaced their keepers.”

Speaking in the shadow of Petco Park, the home of baseball’s San Diego Padres, Stein seemed to touch all the bases in discussing the hottest data-related topics in the operations and technology space:

Legal Entity Identifiers

Stein is a proponent of widespread adoption of Legal Entity Identifiers. (read more…)