More spoofing - more permanent trading and membership bans

Once again, CME has issued notices imposing fines for disruptive trading.  In two separate set of coordinated cases - the first, 16-0582-BC (One for NYMEX and one for COMEX), and another, 16-0475-BC (COMEX for both but two different individuals) - the CME found disruptive trading. 

It is interesting in the 16-0582-BC case that the exchange specifically references the trader's algorithm entered the disruptive trades. The fine here was $80,000 (split between the two exchanges) and a four week trading suspension. The fine with only a suspension might indicate the exchange was unsure whether the order activity was intentional or unintentional.

That inference could arise because the other pair of notices cite that both of the traders entered orders with intent to cancel. In these cases the fines were $80K and $60 and a permanent bar on trading activity and membership in a CME market.

I have had clients say one of two things:
You can't spoof a market - especially crude or natural gas - manually; and
It is algos that will get you in trouble.

These cases point out two very important things - first, the exchanges don't believe only algos spoof and that you can be found to be manually spoofing big markets (the second pair of notices covered the COMEX gold futures); and second, they may find intent and correspondingly impose greater penalties on manually entered orders than they do on an algo.

Food for thought

DCM is helping clients design and implement surveillance for these and other types of US exchange and physical market trading activities. We are happy to speak with you at any time.