Convicted spoofer Michael Coscia has been sentenced to three years in
jail by a US court – the first incarceration of its kind in the US.
Coscia, head of proprietary trading firm Panther Energy, was convicted last
year after he
CME Group has issued a 60-day ban against a
trader it accuses of spoofing in its gold and natural gas futures markets – the
ban comes just weeks after a US court sentenced
Michael Coscia to three years in jail for ...
The incarceration of a trader convicted of spoofing has heightened awareness of the practice, but how hard is it to spot and how prevalent is it in FX? Colin Lambert investigates.
“You have to be pretty desperate to resort to spoofing markets – especially on exchanges where it’s nigh on impossible to shield your
activities,” argues a senior electronic trader in London. “Even in OTC markets it’s not easy to get away with given the MIS capabilities of firms today.”
In what is being seen as a surprise move, Navinder Singh Sarao, the UK-based day trader accused by US authorities of spoofing markets and contributing to the May 2010 flash crash in US equities, has pleaded guilty in a US court appearance following his extradition from the UK.
Sarao, nicknamed the “hound of Hounslow” because he operated at times from a bedroom in his parents’ house in that London suburb, was extradited after being accused of making almost $40 million by entering large bids and offers against his intended trading direction on CME stock futures.
A US district court judge has entered a consent order brought by the US Commodity Futures Trading Commission (CFTC) against UK-based trader Navinder Singh Sarao.
Sarao was accused by US authorities of helping to trigger the infamous flash crash in US equity markets in May 2010 and was extradited to the US recently.
The order requires him to pay a $25,743.174.52 civil monetary penalty and $12,871,587.26 in disgorgement. It also permanently prohibits Sarao from further violations of the Commodity Exchange Act (CEA) and CFTC regulations, as charged, and imposes permanent trading and registration bans against him.
Matt Kulkin, a partner at Steptoe and Johnson, explains to Profit & Loss deputy editor, Galen Stops, why a “copy and paste” approach to regulation won’t work for FX.
FX is often referred to as an “unregulated” or “self-regulated” market, and yet in recent years bans have been fined billions of dollars by regulators for alleged infractions in this market, while criminal charges are being brought against FX traders in the US courts.
Kulkin explains this disparity by pointing out that the entities involved this market are regulated and therefore subject to oversight by a various national authorities. However, unlike the securities markets or the OTC derivatives markets, there aren’t concrete regulations regarding the market place, he says.
The US Financial Industry Review Authority (FINRA) has filed a notice with the Securities and Exchange Commission that will enable it to clamp down on what it considers “disruptive quoting and trading activity” much quicker than is currently possible.
In the filing FINRA notes that taking action against an alleged miscreant can take “several years” before it is concluded, but it points out that there are, “…certain clear cases of disruptive and manipulative behaviour or cases where the potential harm to investors is so large, that FINRA should have the authority to initiate an expedited proceeding to stop the behaviour from continuing”.