CME Fined Trader $55,000 for ‘Spoofing’ Treasury Futures

[OddTrader]

Traders Magazine Online News, July 22, 2015

Brian Louis

(Bloomberg) -- CME Group Inc. fined a trader, James Groth, $55,000 and suspended him for 10 days for spoofing, a form of market manipulation that’s received a flood of recent attention because of allegations it helped spur the 2010 flash crash.

From May 2011 through October 2011, Groth placed orders for Treasury futures without intending to actually complete the transactions, according to Chicago-based CME, which runs the exchange where the futures contracts trade.

Groth neither admitted nor denied the allegations, according to CME’s disciplinary action. He didn’t respond to an e-mail or voicemail message seeking a comment.

Spoofing is banned because it can trick other traders into thinking prices are poised to move, spooking them into nudging prices in the direction the cheater prefers. In April, U.S. prosecutors accused Navinder Singh Sarao of engaging in the technique for years and helping spur the flash crash, which erased almost $1 trillion from U.S. stocks in minutes in May 2010.

CME said Groth entered large orders designed to trick other traders into thinking there was an imbalance between buying and selling interest. Once prices started moving in response, smaller orders that he’d separately placed were completed, according to CME.

“Groth entered these large orders for the purpose of inducing other market participants to trade opposite his smaller resting orders,” the exchange said, adding that this was a violation of its rules.

The Treasury Market Practices Group, an advisory committee backed by the Federal Reserve Bank of New York, wants investors, brokerages and markets to ensure they’re actively working to prevent manipulative strategies in U.S. Treasuries such as spoofing, according to a paper released in April.

This poor guy must be a profitable trader! LOL

 

[syswizard]

Markets should be free. If putting fake orders in the market makes you money good on you. I will be very happy to take money off you.

Agreed,but instead of fining traders, all the CME has to do is start charging for cancelled orders and/or counting the spoof orders and flag the account holder that is sending them.
But they won't do it.

 

[tommo]

New
Markets should be free. If putting fake orders in the market makes you money good on you. I will be very happy to take money off you.Agreed,but instead of fining traders, all the CME has to do is start charging for cancelled orders and/or counting the spoof orders and flag the account holder that is sending them.
But they won't do it.
#12 6 minutes agoReport
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There are far less spoofers than there used to be. I know people that would make upwards of 30k on a good day taking money off spoofers.

The market when left alone will find it own balance. Lots of people spoofing initially takes money off front runners. Eventually front runners get killed off and the survivors learn to trade markets with spoofers in. Eventually more and more people take money off spoofers so they stop spoofing as much.

Evolution always weeds out the weak from the strong and things find an equilibrium.

If spoofers bother ppl my advice is learn to trade them. It can be a huge edge.

 

[syswizard]

To the extent that spoofing can be classified as fraud, it should at least be deterred IMHO.

 

[tommo]

Hmm I'm by no means pro spoofers. I am just anti regulators fiddling with markets.

I've seen plenty of spoofers put fake orders in and get filled on them and take whopping losses. It's just a trading strategy that by no means is free money. They take the risk like the rest of us

 

[syswizard]

It's just a trading strategy that by no means is free money. They take the risk like the rest of us.

Agree, but there was one exception to that:
Nav Sarao - knocking down a purported $10 million per year....mostly spoofing.
Now that's damn close to "Free Money".

 

[tommo]

Haha I actually worked for the same company as him (although at different times) and I have friends that are great friends with him.

He has been made a total scapegoat. He did do some spoofing. But did plenty of other stuff. He made most of his money doing other trades. He started as a one lot trader and just built it up over the years. Nothing sinister about what he dd at all.

 

[syswizard]

He did do some spoofing. But did plenty of other stuff. He made most of his money doing other trades.

Well I wouldn't be so sure about that. I know he was an excellent trader without his algo.
We'll see what comes out at his trial next year. It's gonna take them months just to trace the money flows and all of the trades.

 

[Frederick Foresight]

yeah its pretty tiring way to trade to be honest because you are constantly looking for them. Its more of a bonus when its there than anything else

I can imagine. Can you follow more than one instrument in this manner?

 

[syswizard]

I can imagine. Can you follow more than one instrument in this manner?

re: "Regardless, I imagine you must be riveted to the screen since you get very little advance notice when to act"
if you've got custom software that scans the level 2 quotes:
1) yes you can follow more than one symbol
2) no you don't have to be glued to the screen

Based on criteria you set forth, it will flag the unusual spoofing activity and provide a summary of the frequency of it's occurrence....and sort by highest frequency for all symbols to show which ones are getting spoofed the most.