Trader Settles CFTC Spoofing Charges
Commentary by Bob Zwirb
A New York-based trader settled charges with the CFTC that he engaged in "spoofing" practices in relation to futures contracts traded on the New York Mercantile Exchange and the Commodity Exchange, Inc.
In the Order, the CFTC determined that Simon Posen employed a spoofing strategy in which he would place large orders on one side of the market, followed by the entry of smaller orders on the opposite side of the market, and then would cancel the larger orders as soon as the smaller orders were filled. Mr. Posen then would repeat this spoofing pattern immediately in reverse in order to exit the positions that he created. According to the CFTC, Mr. Posen employed this spoofing strategy for thousands of trades in crude oil, gold, silver and copper contracts.
Mr. Posen will pay a $635,000 penalty and is banned permanently from CFTC registration.
Commentary
The CFTC's campaign against spoofing continues with this action reaching further down the trading world's food chain to capture "a manual 'point and click' trader who traded by computer from his New York City apartment for his own account." Although a substantial penalty was assessed here – $635,000 – we have no way of knowing how this monetary sanction was calculated, as neither the CFTC's press release nor its Order discusses the gains that Mr. Posen derived from his conduct or the harm he caused to the market. Note that these sanctions are on top of those imposed by the exchange, which included fines totaling $165,000 and two short-term trading bans.