Two Recent Settlements Demonstrate CFTC’s Continued Focus on Spoofing

Preventing and responding to market manipulation is one of the primary mandates of the SEC and CFTC, the latter of which recently entered into settlement orders with a bank and a day trader, alleging in each case that the respondents had engaged in spoofing – a manipulative practice by which a trader enters multiple orders for a given commodity or futures contract with no intention of executing them in order to move the price of that contract in a desired direction. This article analyzes the terms of the settlement orders, which were issued around the same time as the decision by the U.S. Court of Appeals for the Seventh Circuit in U.S. v. Coscia, which upheld the constitutionality of the anti-spoofing provision of the Commodity Exchange Act. See “Decision by U.S. Court of Appeals Sets Precedent for Emboldened Stance Toward Spoofing” (Sep. 7, 2017). For more on spoofing, see “WilmerHale Attorneys Detail 2016 CFTC Enforcement Actions and Potential Priorities Under Trump Administration” (Feb. 16, 2017); “Managing the Machine: How Hedge Fund Managers Can Examine and Document Their Automated Trading Strategies (Part One of Two)” (Jan. 7, 2016); and “E.U. Market Abuse Scenarios Hedge Fund Managers Must Consider” (Dec. 17, 2015).

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