Commodity Futures Trading Commission (CFTC) issued an order for $1 million against Propex Derivatives Pty Ltd (Propex), Australia-based proprietary trading firm, implicated in a spoofing scheme. The company was involved in unlawful trading activities on the U.S. commodities market through former trader in the period of July 2012 to March 2017.
Propex agreed to pay the amount which includes $464,300 in restitution, $73,429 in criminal disgorgement, and a $462,271 civil monetary penalty. CFTC also issued a cease and desist order from violating the Commodity Exchange Act’s.
CFTC Director of Enforcement James McDonald commented:
This enforcement action demonstrates, once again, the continued parallel efforts between the CFTC and our law enforcement partners to preserve market integrity and protect market participants. This action also shows the CFTC’s commitment to holding wrongdoers accountable wherever they may be located, including halfway around the globe.
It was found that a former Propex trader placed numerous E-mini S&P 500 features contracts bids and offers on the Chicago Mercantile Exchange (CME) on Propex’s behalf. He placed thousands of large-volume bids and orders only to cancel them before execution, which is a typical spoofing strategy. On the one side of the market he would place genuine orders, he wanted to fill and “spoof” orders on the other side with the intention of cancelling them right after the actual ones got filled. A typical indicator of the spoof orders is having five times more contracts as an authentic order.