Disruptive Trading, Spoofing? You don't need to get execution to get fined $800K for "failure to supervise"
The CME issued an $800K fine to a Chicago trading firm for entering orders "mislead..; other market participants with respect to market liquidity, for the purpose and with the effect of artificially decreasing market volatility and the number of other market participants." Note, the violation is for misleading perceptions of liquidity. The CME also noted "In doing so, the (individual) accumulated resting order quantities so large that they would have violated his clearing firm’s risk limits had they been filled, and on several occasions he acquired positions so large they did violate those risk limits." So, not only did the individual mislead the market, the individual mislead the firm.
This is an important distinction. A simple way to consider the difference between risk and compliance oversight arises from this distinction. DCM always stresses in compliance training or in seminars we conduct that there is a simple but profound difference that should be followed:
"The Panel further found that Hard Eight lacked adequate risk and compliance controls. Despite other members of the firm knowing the partner’s trading activity and that the partner’s trading repeatedly caused the firm to post maintenance margin, the firm failed to diligently supervise the partner and allowed the violative trading to continue."
So, the trader was violating your internal controls and you did not examine the activities - you get an $800K fine for "failure to supervise" and also the underlying violations.
By the way, the trader got a $200K fine and a nine month suspension from CME markets - so the company got a 4 times fine for failing to control the trader. A nice round $1 million in total. The company disciplinary notice is here and the individual's notice is here