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 Mon, 01/29/2018 - 09:27 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

Theosebes Goodfellow P4K Mon, 01/29/2018 - 11:39 Permalink

~ 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."~

You want to stop this shit? Just put a $1 charge on every bid and ask, then follow the money. Have the collected "tax" go to some legitimate cause like the Salvation Army. Problem solved. 

Also, until they start giving the CEOs of these companies hard time in jail and lifelong bans from the commodities markets, they will continue to do this. Send the fuckers to JAIL.

In reply to by P4K

lincolnsteffens Looney Mon, 01/29/2018 - 11:24 Permalink

Bill Murphy and GATA have been pointing out and sending evidence of manipulation in the gold and silver futures market to the CFTC for years. Result has been crickets.

One can only hope this will now change. I'm just wondering if the Trump Administration has anything to do with this. Only time will tell.

In reply to by Looney

All Risk No Reward 1.21 jigawatts Mon, 01/29/2018 - 11:13 Permalink

Ordinary Jewish people in Israel are victims of Debt-based Monetary Tyranny.

Blaming the victims ONLY CONCEALS THE IDENTITY OF THE MONEY POWER BIG BAD.

Is that your intent?

========================

"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks."
~Lord Acton

“When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.”
~Napoleon Bonaparte

"Let the American people go into their debt-funding schemes and banking systems, and from that hour their boasted independence will be a mere phantom."
~William Pitt, (referring to the inauguration of the first National Bank in the United States under Alexander Hamilton).

How To Be a Crook
https://www.youtube.com/watch?v=2oHbwdNcHbc

Poverty - Debt Is Not a Choice
https://www.youtube.com/watch?v=t7BTTB4tiEU

Renaissance 2.0 The Rise of [Debt-Money Monopolist] Financial Empire
https://www.youtube.com/watch?v=96c2wXcNA7A

Debunking Money
https://www.youtube.com/watch?v=5iBSBVew-3Y

Krugman (and each MIT economist professor - THEY KNOW AND THEY OCCULT!) is a Goebbelsian propagandist as he covers the crimes of wolves with his fake sheep suit and lisp.

Krugman to Lietaer: "Never touch the money system!"
https://www.youtube.com/watch?v=Q6nL9elK0EY

And It's Gone
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~Andrew Jackson

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D503, Zerohedge Comment

In reply to by 1.21 jigawatts

JIMSJOE2 BigWillyStyle887 Mon, 01/29/2018 - 09:21 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

Keltner Channel Surf JIMSJOE2 Mon, 01/29/2018 - 15:31 Permalink

"...looks like your everyday market noise and is extremely short term in duration."

And, your post implies, also likely small in overall amplitude.  Which is why the Tylers are slightly naughty in the 'manipulation' meme, given there's not a 1-1 relationship between love of gold and detailed market knowledge here, some will think, for example, today's gold decline could be entirely a 'spoofing' event, not true. 

In reply to by JIMSJOE2

Richard640 Mon, 01/29/2018 - 08:07 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!

lincolnsteffens Jambo Mambo Bill Mon, 01/29/2018 - 11:35 Permalink

The US Gov. has voted to allow itself to manipulate or take control of all markets, industries, and people in the "Name of National Security". We have continuously been in a manipulated official "State of Emergency". This gives the manipulators cover under "The Color of Law".

If you don't know what "The Color of Law" means then you are clueless to know what is being done to you illegally.

In reply to by Jambo Mambo Bill

DuneCreature Mon, 01/29/2018 - 08:13 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 Mon, 01/29/2018 - 08:35 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 Mon, 01/29/2018 - 08:13 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 Mon, 01/29/2018 - 08:13 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 Mon, 01/29/2018 - 08:18 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.

 

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