Merrill Lynch Commodities Receives $25m Fine for Spoofing and Market Manipulation

Merrill Lynch Commodities Inc has received a $25m charge from the US Commodity Futures Trading Commission (CFTC) for spoofing, manipulation and attempted manipulation, with respect to certain precious metals futures. 

The CFTC found that Merrill Lynch Commodities traders placed orders to buy and sell precious metals futures contracts with the intent to cancel their orders before execution. The traders employed a specific spoofing strategy in which they would place a small bid or offer with the intent to execute that order. Prior to the execution of that order, they would place a larger order on the opposite side of the same market with the intent to cancel that order before execution. This manipulated market prices and created artificial and fluctuating prices. 

The traders discussed their activity via electronic messages, which were ultimately uncovered and used as evidence against them. 

Commenting on the CFTC’s order, Director of Enforcement James McDonald said:

“Today’s enforcement action shows that the Commission continues to aggressively pursue those who manipulate and spoof in our markets. If left unchecked, this sort of misconduct can undermine the integrity of the price discovery process, harm law-abiding market participants, and diminish confidence in our markets more generally.  That’s why we will continue to keep our markets free from spoofing and manipulation.”