CFTC, ex-UBS trader request stay extension as resolution nears in spoofing case

Maria Nikolova

The US regulator and Andre Flotron explain they have reached an agreement on the terms of a proposed Consent Order resolving all of the Commission’s claims against the former trader.

The United States Commodity Futures Trading Commission (CFTC) and ex-UBS precious metals trader Andre Flotron have marked some progress in a spoofing case, as indicated by the latest documents filed with the Connecticut District Court.

In the documents, submitted on Tuesday, September 18th, both parties in the case request for a six-week extension of the stay the Court granted in July this year. The extension is sought for formal reasons.

Let’s recall that in their Joint Motion from July 2018, the parties reported reaching an agreement in principle to resolve the Commission’s claims against Flotron in this matter. Since then, the Division of Enforcement and the ex-trader have reached an agreement on the terms of a proposed Consent Order that would resolve all of the Commission’s claims against the Defendant and would conclude this litigation in its entirety.

As the Division does not possess independent settlement authority but rather presents its settlement recommendations to the Commissioners for approval, it needs extra time to complete certain procedures. Accordingly, to avoid the unnecessary expenditure of resources and to give the Commission time to review the Proposed Order, the parties respectfully request that the Court continue the stay of this matter for an additional six weeks, until October 30th.

In its Complaint, 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.

Furthermore, 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).

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

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