Broker-Dealer Fined for Spoofing in Treasuries

A broker-dealer settled FINRA charges for engaging in "spoofing" and "cross spoofing" in US Treasury securities markets.

According to the AWC, a former trader at the broker-dealer entered non-bona fide orders to create false appearances of market activity—spoofing—to induce opposite-side executions. FINRA found that the trader engaged in spoofing in US Treasury securities (744 instances) to trigger opposite-side executions in the same securities, as well as "cross-product spoofing" (69 instances) to induce executions in US Treasury futures contracts that correlated to the US Treasury securities.

Further, FINRA determined that the broker-dealer lacked adequate supervisory systems and procedures to detect the spoofing activity.

FINRA concluded that the firm violated FINRA Rule 3110 ("Supervision") and Rule 2010 ("Standards of Commercial Honor and Principles of Trade").

To settle the charges, the broker-dealer agreed to (i) a censure and (ii) pay a $6 million fine.