Regulation on trading frauds causes
In an article by Gregory Meyer and Lindsay Whipp at FT the conviction for spoofing in the Futures market is extensively referenced and the comparison with the libor scandal is made in terms that show how the state is beginning to take serious legal action against fraudulent market practices. Understanding these practices is one aspect of the issue putting them in legal terms as regulations and guidance is another one.
New Jersey-based Michael Coscia, of Panther Energy Trading, on Tuesday joined Tom Hayes, the former UBS trader, in being found guilty by jury of disrupting some of the world’s most important and closely scrutinised markets. However, in the futures industry, long known for its freewheeling and aggressive behaviour in the trading pits, that period of introspection may only be about to begin. Mr Coscia had been charged with fraud and so-called “spoofing”, which involves rapidly entering and cancelling orders to intentionally trick other traders into buying above or selling below the market price.
Exchanges had long prohibited disruptive behaviour but spoofing was explicitly banned by the US Dodd-Frank financial reform law of 2010, as authorities grew concerned that anonymous computers could repeat it hundreds of times a second.
Last year, futures exchanges also issued new rules formally proscribing spoofing. “We can prevent spoofing now that we have a legal definition of what that is,” Jeffrey Sprecher, chief executive of Intercontinental Exchange, said on a conference panel.