CFTC and ex-UBS trader accused of spoofing near settlement

Less than a week after the United States Commodity Futures Trading Commission (CFTC) sought to rebut the objections of ex-UBS precious metals trader Andre Flotron in a spoofing case, the regulator and the defendant appear to be close to a settlement.

According to a Joint Motion submitted at the Connecticut District Court on July 20^th, the parties move the Court for a 60-day stay of this matter in contemplation of settlement.

In support of their motion, the parties state that the Division of Enforcement and the defendant reached an agreement in principle that would resolve all of the Commission’s claims against Flotron and would conclude this litigation in its entirety.

Let’s recall that the CFTC alleges that Andre Flotron engaged in a five-year manipulative and deceptive scheme to trick other traders in the precious metals futures market. The regulator says that he placed large bids and offers with the intent to cancel them before execution. Under the allegations, he intended for these “spoof” orders to induce other market participants to transact on smaller, “genuine” orders that he placed on the opposite side of the market.

The CFTC Complaint describes a particular pattern in which Flotron repeatedly placed large orders in same-digit amounts (e.g., 33 lots, 55 lots, 111 lots) opposite small orders in single-digit amounts (e.g., 1 lot, 5 lots, 7 lots). While the small orders were usually placed at the best bid or best offer, he placed the large orders away from the best bid or offer, where they were less likely to be filled. After the small orders were filled, he cancelled the large order. The CFTC Complaint details nine specific examples that are illustrative of the pattern described above.

The CFTC alleges that Flotron traded in this manner from at least 2008 through 2013.

In addition, the CFTC says that in 2008, Flotron taught a subordinate to place orders in a similar pattern and, in doing so, he revealed his motive and intent to trick other market participants.

The CFTC accuses the defendant of violations of the anti-spoofing provision of the Commodity Exchange Act (Count I), and of violations of the Act’s and Commission Regulations’ prohibition on manipulative and deceptive devices (Count II).

In the latest filing with the Court, the parties request that the Court stay the case, adjourn all pre-trial deadlines and hold all discovery in abeyance for a period of sixty days, until September 18, 2018. By that date the parties are set to report back to the Court on the status of the matter.

The case is captioned Commodity Futures Trading Commission v. Flotron (3:18-cv-00158).