18 November 2019: The U.S Commodity Futures Trading Commission (CFTC) has issued an order against Tower Research Capital LLC, with a record $67.4 million fine, after it was found to have engaged in a “manipulative and deceptive scheme”.
The CFTC alleges that the firm operated the scheme over a period of nearly two years, which saw three of its traders engage in thousands of occasions of spoofing in equity index futures products traded on the Chicago Mercantile Exchange and the Chicago Board of Trade. The scheme caused $35,593,849 million in market losses.
The CFTC investigation found that from March 2012 through to December 2013 Tower’s traders placed thousands of orders to buy or sell futures contracts with the intent to cancel those orders prior to execution. The traders engaged in this scheme to induce other market participants to trade against their genuine orders—by intentionally sending a false signal to the market that they wanted to buy or sell the number of contracts specified in the spoof orders and creating a false impression of supply or demand—so that the genuine orders would fill sooner, at better prices, or in larger quantities than they otherwise would.
Commenting on the case, CFTC Director of Enforcement, James McDonald said, “Today’s enforcement action shows that the CFTC will continue to aggressively pursue those who engage in manipulative and deceptive conduct in our markets. This misconduct undermines the integrity of the price discovery process and can result, as it did here, in harm to law-abiding market participants.”
The $67.4m comprises $32,593,849m in restitution, $10,500,000 in disgorgement and a $24,400,000 civil monetary penalty. It is the largest relief ever ordered in a spoofing case.