Clever! RELEASE Number 7806-18 September 27, 2018 CFTC Charges Futures Trader with Cross-Exchange Manipulation Washington, DC — The Commodity Futures Trading Commission (CFTC) today issued an Order filing and simultaneously settling charges against Davis Ramsey, a Florida-based futures trader, for employing a manipulative scheme to influence the prices of certain futures contracts traded on the Chicago Mercantile Exchange, Inc. (CME) and Commodity Exchange, Inc. (COMEX), both Designated Contract Markets operated by the CME Group, Inc. (CME Group), to impact the outcome of related binary contracts traded on the North American Derivatives Exchange (Nadex). CFTC Director of Enforcement Comments James McDonald, CFTC Director of Enforcement, commented: “This action highlights the CFTC’s ability to detect and prosecute manipulative conduct — even when that conduct stretches across different markets and different exchanges. I would like to thank the CME Group and Nadex for their assistance in this case. This case highlights again that, together, we will protect our markets from all types of manipulative activities.” Summary of Order The Order requires Ramsey to pay a $325,000 civil monetary penalty, $250,636.25 in disgorgement, and prohibits him, for a period of five years from the date of the Order, from: 1) entering into any transactions involving commodity interests; 2) having any commodity interests traded on his behalf; 3) controlling or directing the trading for or on behalf of any other person or entity in any account involving commodity interests; and 4) soliciting, receiving, or accepting any funds from any person for the purpose of purchasing or selling any commodity interests. The Order also permanently prohibits Ramsey from trading on Nadex and requires him to cease and desist from further violations of the Commodity Exchange Act (CEA) and Commission Regulations (Regulations), as charged. According to the Order, from at least April 2015 through May 2017, Ramsey employed a manipulative strategy in which he engaged in transactions in the futures market to benefit positions he held in certain binary contracts traded on Nadex, a registered Designated Contract Market and Derivatives Clearing Organization. On multiple occasions, Ramsey took a position in one or more binary contracts for which the outcome at expiration was determined based on the price of certain futures contracts that were traded on either COMEX or CME, each a Designated Contract Market operated by CME Group. Ramsey then placed trades in the relevant futures contracts with the intent and in a manner designed to impact the price of those futures contracts to achieve his further objective, which was to influence the settlement of the binary contracts in his favor and benefit his position on Nadex. As detailed in the Order, on at least one occasion, in connection with this strategy and with the intent to influence market prices, Ramsey caused the S&P e-mini 500 futures contract on CME to be traded at an artificial price. The Order finds that, by such conduct, Ramsey attempted to, and did, engage in manipulation in violation of the CEA and Regulations. The CFTC’s investigation was conducted in conjunction with related inquiries by CME Group and Nadex. Today, CME Group issued a Notice of Disciplinary Action against Ramsey (CME NDA) and, on September 26, 2018, a Hearing Officer for Nadex approved a settlement agreement with Ramsey (Nadex Settlement). The CME NDA and the Nadex Settlement arose out of the same misconduct that is the subject of the CFTC’s Order. The CME NDA orders Ramsey to pay a fine of $135,000 and further orders that Ramsey’s access to all CME Group trading floors and direct and indirect access to all electronic trading and clearing platforms owned or controlled by CME Group will be suspended for a period of five years. The Nadex Settlement requires Ramsey to pay $250,636.25 in disgorgement and a fine of $140,000, and further provides that Ramsey will be permanently barred from membership or trading on Nadex.
It always did seem relatively easy to do with the less liquid contracts, but not using ES of all things! He must have picked some pretty quiet days/times of day to pull that off.
When i traded binaries, i saw this going on often in the FX overnight, a few seconds before settlement time the price would jump above/below the nearest round number strike price, get pinned for just the right amount of time, and then fall back immediately after the settlement time.
Yeah, that's where I would have expected it rather than ES. Probably some people sweating today, hope they sweep them all up!
i also traded the binaries at Nadex and went slow and easy. i saw all sorts of manipulation by Nadex, like they quotes stop prior to expiration - how convenient. i gave up on it completely.
The best years to trade binaries was between 2003 and 2010. Bid ask/spreads were half/a third of what they are now and volatility was often mispriced by the market maker, they were often a bit slow to catch on to the fact it was a small range day and you could put on an Iron Condor before they figured out prices were not going anywhere before expiration.