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

Discussion in 'Wall St. News' started by dealmaker, Jul 25, 2015.

  1. dealmaker

    dealmaker


    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.
     
  2. Baron

    Baron ET Founder

    I'd be curious to know how the regulators determine the "intent" of large orders like that.

    Maybe it's just the fact that there is a consistent pattern of large orders appearing and then just disappearing instead of appearing and staying steady until they are executed. In other words, with a pattern of orders like that, there's no way that guy could just be changing his mind that often.

    I think I just answered my own question.... LOL :D
     
  3. i960

    i960

    I notice "them" doing this other thing lately where they bound something on both sides with larger orders far out on the bid and far out on the ask - almost as if they're trying to hold the price within a narrow range.

    I'm also convinced that even though some of these larger orders fill that they net out in an opposite direction for the originating entity making the order. There's just no reason for a larger trader to expose a large order IMO - so fill or no fill I consider it misleading in nature.
     
  4. tommo

    tommo

    Someone was spoofing CL the other day with 200 lots. Was an easy $500 or so in it for me. It happens in every market every day pretty much. I don't know why people get their underwear in knots over it. If the orders are in the market they are there to be taken. Mr 200 lot in this case could easily get filled on his "fake" order and wear the cost.

    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.
     
  5. How was it an easy $500?
     
  6. tommo

    tommo

    Same way all spoofers are easy money. Once you spot them you look for their orders to come in, see them move the market, fade the move they have created and profit when they pull their orders for the snap back. Youre basically doing what the spoofer is doing without actually needing to put the fake orders in yourself. Its a bread and butter trade for most day traders I work with.
     
    terminator8 and i960 like this.
  7. Interesting. So when you trade specifically to fade the spoofer, do you consider where the market might otherwise be headed were it not for the spoofer, or do you just play this little move in isolation? And, if I may ask, how many contracts did you trade for the $500. I ask because I'm curious to know how many ticks the fade was good for in this particular instance, given that he was spoofing 200s.
     
  8. tommo

    tommo

    No I don't pay any attention to where the market would otherwise have gone to be honest. Ive been doing this 10 years now and put very little emphasis on technical analysis or any of that stuff. I know what I am looking for and when it happens I trade it.

    It depends on the market, but typically will look for 3 ticks or so profit on a 2 or 3 lot. You'll typically called get 9 or 10 setups during a "spoofer session"
     
  9. Interesting, thanks. Yes, it occurred to me afterwards that I should have asked whether the trades took place during slower or more active periods. Regardless, I imagine you must be riveted to the screen since you get very little advance notice when to act.
     
  10. tommo

    tommo

    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
     
    #10     Jul 26, 2015