CFTC fines two Dubai traders $100,000 for wash trading

Rick Steves

CME Group also issued a Notice of Disciplinary Action in which Bansal agreed to pay a fine of $25,000 and serve a 10-day suspension, and Agarwal agreed to pay of fine of $10,000 with a 10-day suspension.

The Commodity Futures Trading Commission has settled charges against Dubai residents Kunal Bansal and Vinit Agarwal and their Hong Kong and Dubai based firms Aralia Securities, Ltd. (Aralia) and Vintage Bullion DMCC (Vintage).

The order requires Bansal, Agarwal, Aralia, and Vintage jointly and severally to pay a $100,000 civil monetary penalty for having engaged in wash sales and non-competitive transactions.

13 wash trades consisting of 189 gold futures contracts

According to the CFTC, Kunal Bansal and Vinit Agarwal engaged in multiple wash sales and non-competitive transactions for accounts held by Aralia and Vintage, respectively.

The regulator alleged that on or about April 14, 2020, Bansal directed Agarwal to enter orders for Vintage to sell 250 gold futures contracts traded on COMEX at a specific time.

At the same time Agarwal entered those orders, Bansal entered off-setting orders to purchase gold futures in the same quantities and at the same prices.

To ensure the trades would match, Agarwal lowered his offer to match Bansal’s bid. This has resulted in Aralia and Vintage entering into a total of 13 wash trades consisting of 189 gold futures contracts.

The CFTC confirmed the conduct through a parallel inquiry by the CME Group, which has also issued a Notice of Disciplinary Action in which Bansal agreed to pay a fine of $25,000 and serve a 10-day suspension, and Agarwal agreed to pay of fine of $10,000 with a 10-day suspension.

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SEC catches wash trading in meme stocks

The Securities and Exchange Commission has recently charged two traders, Suyun Gu and Yong Lee, with taking advantage of the maker-taker model in options markets to collect liquid rebates offered by a number of stockbrokers.

They simultaneously placed buy and sell orders for the same meme stocks, including GameStop. While the practice leaves their actual exposure balanced, the net result was that their risk-free positions yielded rebates thanks to the pricing model offered by broker-dealer platforms.

As some exchanges reimburse traders for providing liquidly through their market participation, Gu executed more than 11,000 trades with himself, netting at least $668,671 in liquidity incentives. His partner, Lee, also executed 2,300 that netted him $51,334.

The alleged subterfuge went something like this: the defendants selected far out-of-the-money put options on some meme stocks, assuming that such bets “would be easier to trade against themselves because interest in buying the ‘meme stocks’ and related price increases would make put options on those stocks less attractive,” the SEC explains.

In a parallel statement, the SEC said Gu and Lee falsely represented they had made bids, and while the washed trades had taken place to create an illusion to encourage other investors to trade against their genuine orders and move the market for their own benefit.

The agency further explained that the dodgy activity impacted the market as it skewed the volume in certain option contracts and induced other traders to place trades in otherwise illiquid option contracts.

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