Broker-Dealer Fined for Spoofing in U.S. Treasury Securities

A broker-dealer settled charges with FINRA for engaging in 717 instances of "spoofing" in the U.S. Treasury securities secondary market.

In a Letter of Acceptance, Waiver and Consent, FINRA stated that two of the broker-dealer's former traders entered non-bona fide spoofing orders to cause market participants to execute orders on the other side of the market. FINRA found that the two traders engaged in 525 instances of spoofing in (i) a U.S. Treasury security to induce opposite-side executions in the same security and
(ii) 192 instances of "cross-product spoofing" in a U.S. Treasury security to induce opposite-side executions in a correlated U.S. Treasury futures contract. In addition, FINRA found that the broker-dealer lacked surveillance to monitor orders entered into by its traders which would have allowed it to detect potential spoofing. FINRA concluded that the broker-dealer 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 $24 million fine.