Traders Told to Cough Up the Cash After Their HFT Firm Is Fined

What do they mean by "fake trades to boost volume"? If they mean spoofing, then this doesn't result in a trade. If they mean to buy and sell, simply for the purpose of creating volume, then how is this illegal? All the HTF firms buy and sell to make a penny already. Were these guys buying and selling at the same price simply to create volume? How does this make money? (other than being a MM I guess so you get a rebate for taking the other side of the trade or however that works)
 
Gotcha said:
What do they mean by "fake trades to boost volume"? If they mean spoofing, then this doesn't result in a trade. If they mean to buy and sell, simply for the purpose of creating volume, then how is this illegal? All the HTF firms buy and sell to make a penny already. Were these guys buying and selling at the same price simply to create volume? How does this make money? (other than being a MM I guess so you get a rebate for taking the other side of the trade or however that works)
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Read it all yourself.

http://www.cmegroup.com/notices/disciplinary/2017/07/CME-13-9575-BC.html#pageNumber=1
 
First, during the period from January 2014 to April 2014, two traders employed by DV Trading rapidly created a position and then liquidated that position opposite each other at the same price. Second, during the period from June 2014 through July 2015, a single trader repeatedly entered opposing buy and sell orders for the same account with the intent and effect that the orders match. This non-bona fide trading activity allowed DV Trading—a participant in the CME Interest Rate Market Maker Program for Eurodollar Pack and Bundle Futures (“Program”)—to unjustifiably earn monthly trading-fee credits under the Program based on the number of Eurodollar futures contracts they traded. In total, DV Trading earned credits through this self-matching activity in the amount of $467,554.96. The panel further found that sufficient proactive steps were not taken to prevent transactions between accounts with common beneficial ownership. The Panel concluded that this activity violated CME Rules 534, 432.Q., and 432.W.​

I find it amazing they actually thought they weren't going to get caught here. I presume the incentive program was this (https://www.cmegroup.com/content/da...st-rates/files/ir-incentive-program-guide.pdf):

ed_mm_incentives_2017.png
 
Gotcha said:
What do they mean by "fake trades to boost volume"?
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Painting the tape involves transacting for the purpose of changing the stock's price or volume. In this case, the traders were buying and selling among themselves to create the appearance of substantial trading activity. Increased volume can lead naive investors to think something is brewing and buy the stock.

Another form of painting the tape is when a broker buys 100 shares of a stock at an unusually high price right before the market closes at the end of the month so that the monthly statement looks far better than reality. This was done big time in the 90's on the "Maggot Mile" in Boca Raton, Florida (and other similar locations) where they pushed stocks of dubious price and quality.
 
Given this precedent, Wall Street firms and big banks can transfer risk of trading loss to their own traders going forward. THis is a good deal for shareholders. Maybe I should start buying financial stocks.
 
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