Stamford, Connecticut traders charged with 'spoofing' markets

UBS, Deutsche Bank and HSBC to pay millions in spoofing settlement, CFTC says

Deutsche Bank, UBS and HSBC will collectively pay almost $47 million to settle civil regulatory charges some of their traders engaged in spoofing in precious metals.

Deutsche Bank, UBS and HSBC will together pay a total of US$46.6 million (RM181 million) to settle allegations that traders at the banks worked to manipulate futures markets in precious metals through a process known as "spoofing", the Justice Department and Commodity Futures Trading Commission said.

The U.S. Department of Justice indictment includes Edward Bases, 55, of New Canaan, and John Pacilio, 53, of Fairfield, who are charged with spoofing activities while trading in precious metals.

Several of the individuals charged were former employees of the three banks, according to people with knowledge of the matter.

In spoofing traders place buy and sell orders with the intention of cancelling them before completing the transactions. The Complaint further alleges that Mohan executed his scheme by placing at least one iceberg order (whose order quantity is only partially visible in the order book) on one side of the market that he meant to execute and separately placing one or more fully visible orders on the opposite side of the market that he meant to cancel before execution (spoof orders).

Deutsche Bank and UBS have agreed to pay $30 million and $15 million respectively to settle the civil charges in the case, while HSBC will pay $1.6 million, the CFTC said.

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Spoofing, which is a criminal offence under the 2010 Dodd- Frank financial reform law, is said to have had the effect of artificially inflating or deflating prices of futures contracts traded on exchanges in Chicago.

David Liew, a Deutsche Bank trader, pleaded guilty in June and has reportedly agreed to cooperate with prosecutors.

"Spoofing is a particularly pernicious example of bad actors seeking to manipulate the market through the abuse of technology", said James McDonald, the CFTC's enforcement director. The probe received cooperation from all the banks.

Rob Sherman, a spokesman for HSBC, said the bank was "pleased to have resolved this issue".

"The cases against Mr. Flotron are misguided and have no merit".

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