The U.S. Commodity Futures Trading Commission (CFTC) announced that it has issued an Order filing and settling charges against Geneva Trading USA, LLC, a proprietary trading firm in Chicago, Illinois, for engaging in the disruptive trading practice of “spoofing.”
The Order finds that Geneva engaged in this activity through three of its employees identified in the Order as Trader A, Trader B, and Trader C. The Order requires Geneva to pay a $1.5 million civil monetary penalty and to cease and desist from violating the Commodity Exchange Act’s prohibition against spoofing.
James McDonald, CFTC Director of Enforcement, commented:
This case shows our continued commitment to rooting out disruptive trade practices like spoofing from our markets. Participants in these markets — which here included agricultural, energy, and precious metals markets — must have confidence that these markets will not be distorted by the unlawful activity of others. We will continue to work hard to preserve the integrity of our markets.
The Order finds that generally, all three traders used the same spoofing pattern: the trader manually placed a smaller order on one side of the market at or near the best price while placing a larger order or series of orders on the opposite side of the market. The Order finds that the large orders were often modified to avoid getting filled before they were ultimately cancelled. The traders traded in this manner to create — or sometimes exacerbate — an imbalance in the order book and to induce other market participants to transact on the smaller order. The Order finds that collectively, the traders engaged in this conduct regularly, as a pattern and practice.
Trader A generally implemented this trading pattern from at least January 1, 2013 until December 31, 2013 in the following futures contracts: gold, heating oil, RBOB gasoline, and platinum. Trader B generally implemented this trading pattern from at least January 1, 2013 until December 31, 2013 in the light sweet crude oil futures contract. Trader C generally implemented this trading pattern from at least June 1, 2015 through October 21, 2016, in the following futures contracts: feeder cattle, lean hogs, live cattle, Kansas City wheat, Soft Red Winter wheat, soybean meal, and soybeans.
In the Order, the CFTC recognizes Geneva’s early resolution of this matter in the form of a reduced civil monetary penalty. The Order also finds that Geneva cooperated in the investigation and remediated and enhanced its compliance systems and polices related to manipulative trading and spoofing.
The CFTC said that it appreciates the cooperation and assistance of the CME Group in this matter.