Traders Arrested In Futures Spoofing Probe

In a shocking development - shocking because as everyone obviously knows market are never rigged or manipulated - late on Friday Reuters reported that the CFTC was set to announce it has fined European lenders UBS, HSBC and Deutsche Bank millions of dollars each for "spoofing" and manipulation in the U.S. futures market.

The enforcement action by the U.S. derivatives regulator was said to be the result of a multi-agency investigation that also involved the Department of Justice and the FBI - the first of its kind for the CFTC.

Reuters also reported that the fines for UBS and Deutsche Bank would be north of ten million, while the fine for HSBC will be slightly less than that. Spoofing, as a reminder, involves placing bids to buy or offers to sell futures contracts with the intent to cancel them before execution. By creating an illusion of demand, spoofers can influence prices to benefit their market positions. Spoofing is what Navinder Sarao was criminally accused of doing when he singlehandedly launched the May 2010 flash crash, for which he is now imprisoned.

And yes, spoofing is a criminal offense under a provision implemented as part of the 2010 Dodd-Frank financial reform.

* * *

Following the Reuters report, many asked why Sarao was arrested and jailed, while major banks caught spoofing and manipulating futures will get away with paying a fine that is a tiny fraction of how much they made from rigging markets in the first place.

Well, it appears that someone else is going to jail after all, because as Reuters followed up this morning, US authorities were set to arrest several people on Monday as part of the spoofing and manipulation probe. The individuals who are set to be perp walked, were previously employed as traders by UBS, Deutsche Bank and HSBC, and will be charged as part of the multi-agency probe,

Last August, a U.S. appeals court upheld the conviction of former New Jersey-based high-speed trader Michael Coscia who was the first individual to be criminally prosecuted for spoofing in the US, aside from Sarao of course.

This is the first time the CFTC, DOJ and FBI have worked together to bring both criminal and civil charges against multiple companies and individuals, sources said.

As Reuters adds, "the bank investigations have been going on for more than a year, but the CFTC has pursued the charges against the traders as part of a more recent effort led by the agency's head of enforcement, James McDonald, to hold individual employees accountable for corporate wrongdoing, two of the sources said."

McDonald, a former prosecutor in the Southern District of New York who was appointed to the CFTC role in March, has said he aims to achieve that by encouraging companies and staff to report their own wrongdoing and cooperate with investigators in return for more lenient penalties.

Once the names of market riggers are revealed we will promptly follow up, although we are sad to advise readers that the biggest manipulator of all will sadly be spared.

 

Comments

P4K YUNOSELL Jan 29, 2018 9:27 AM Permalink

If the high frequency algos didn't specialize in front-running every legitimate order... there would be no spoofing.  On the floor of the exchanges, with real humans, both of these practices were forbidden; now, due to the magic of the internet, these two practices are all that is left of the market.

Now all we have are a few legitimate orders and A TON of robots sniffing those orders out and front-running them, and robots sniffing out the robots who are sniffing out orders, etc.

 

I wish the DOJ would stop going after the humans waging war against Skynet and would instead go after the illegal trade practices of the algos, HFT firms, and corrupt exchanges that enable this behavior for their own enrichment.

There is no need for millions of automated front-running robots to be able to see 10 layers of volume deep into the bid offer stack on every asset. If you are able to see into the bid offer stack, you should have a duty to not front-run it in any way.

In reply to by YUNOSELL

JIMSJOE2 BigWillyStyle887 Jan 29, 2018 9:21 AM Permalink

Spoofing is not buying or selling contracts and cancelling before execution in futures.If I buy options calls and puts my contracts are executed the second I buy these. Take the last group of traders that were convicted. Two groups of traders working together were buying contracts above and below the current price. One group would move price in the direction of the others group's strike price and then close out the trades. This other group would do the same until price was again at the strike price and then closing out trades. Both groups knew where prices were going in the short term moving price in one direction and then another. These are extremely difficult to detect for regulators because it looks just like your every day market noise and is extremely short term in duration. As always when they are finished price always fall back to the mean..

In reply to by BigWillyStyle887

Richard640 Jan 29, 2018 8:07 AM Permalink

The end is nigh, brother, the end is nigh! 

World markets are like a pie crust stretched across the roof of a volcano!

Fu Manchu is about to pull the lever to the trap door!

Warbucks signals the trusty  Punjab to cut the cords of the rope bridge!

Grease the skids! Happy tobogganing!

DuneCreature Jan 29, 2018 8:13 AM Permalink

What?

Banksters going to jail???? ... I can't believe my eyes!

Oh, never mind, none will do any jail time. ... They'll be fined a small portion of what they stole.

Maybe I should try that. ........ I wonder what would happen to me?

Live Hard, That's Called 'Business Overhead', Die Free

~ DC v8.6

DuneCreature JoseyWalesTheOutlaw Jan 29, 2018 8:35 AM Permalink

The SEC under Trump will pay their porn site membership bills and hire 'New-Age Of-Age Dizzy Blond Hookers ©' for the big office party with the proceeds of their most recent collar.

Party With The Perps! is what they call that festive little mid-winter get together over at SEC Legal HQ.

Live Hard, Don't Kid Yourself About The Regime Change, It Is Business As Usual On Wall Street, Except For A Fresh Gaggle Of Blond Bimbos Have Replaced The Cross Dressers And Cub Scouts, Die Free

~ DC v8.6

In reply to by JoseyWalesTheOutlaw

WTFUD Jan 29, 2018 8:13 AM Permalink

Europe! Europe! Europe!

USA! USA! USA!

There won't be many, there won't be fucking any, no there won't be many going home.

Let the Games begin!

J J Pettigrew Jan 29, 2018 8:13 AM Permalink

" Once the names of market riggers are revealed we will promptly follow up, although we are sad to advise readers that the biggest manipulator of all will sadly be spared. "

 

and what of the insider front runners that are all the other Central Bankers like the Swiss National Bank who just played the market beautifully....

vegas Jan 29, 2018 8:18 AM Permalink

See my shocked face; meanwhile, Jon Corzine & Cankles Clinton walk free, as i guess its more important to end spoofing than it is Corzines outright theft of over a billion dollars, & Cankles selling the U.S. down the river, not to mention Haitian kids. What a great country; WTF.

 

www,traderzoogold.blogspot.com

JoseyWalesTheOutlaw Jan 29, 2018 8:19 AM Permalink

Judge Roy Bean.......... Trust in my judgment of the book. Besides, you're gonna hang no matter what it says in there, 'cause I am the law, and the law is the handmaiden of justice. Get a rope.

NoWayJose Jan 29, 2018 8:19 AM Permalink

Silly stock futures spoofers - they got caught.  Should have stuck to dumping $2 billion in gold futures into an illiquid market at 2:00 AM - that is totally safe!

DaBard51 Jan 29, 2018 8:20 AM Permalink

Rick: How can you close me up? On what grounds?

Captain Renault: I'm shocked, shocked to find that gambling is going on in here!

[a croupier hands Renault a pile of money].

Croupier: Your winnings, sir.

Captain Renault: [sotto voce] Oh, thank you very much. [aloud].

(Casablanca, 1942)

 

When nine hundred years old you become, look this good you will not.

wmbz Jan 29, 2018 8:21 AM Permalink

Just throw some small fry into the deep fryer and claim "we be on da job".

I am certain no one at the top had even a slight clue this was going on, and will be shocked.

When/as Wells Fargo fucks over it's customers, the top never new it was happening.