CFTC settles spoofing charges against futures trader
The CFTC order requires Benjamin Cox to pay a $150,000 civil monetary penalty and suspends him from trading for three months.
The United States Commodity Futures Trading Commission (CFTC) has issued an order filing and settling charges against Benjamin Cox, a trader and floor broker based in Chicago, Illinois, for engaging in spoofing in the Chicago Mercantile Exchange (CME) E-mini S&P 500 and E-mini Nasdaq 100 futures markets.
The CFTC order requires Cox to pay a $150,000 civil monetary penalty and suspends him from trading on or subject to the rules of any CFTC-designated exchange and all other CFTC registered entities and in all commodity interests for a period of three months. Cox will also have to cease and desist from violating the Commodity Exchange Act’s prohibition of spoofing and other disruptive practices.
The CFTC order finds that during the period from April 2014 through, at least, February 2018 (relevant period), Cox manually placed orders in the E-mini S&P 500 and E-mini Nasdaq 100 futures markets with the intent to cancel the orders before their execution. Typically, while Cox had one or more smaller bids or offers resting in a futures market (genuine orders), he placed relatively large bids or offers on the opposite side of the same market, which he intended to cancel before execution (spoof orders).
Cox is alleged to have placed the spoof orders to induce other market participants to fill his genuine orders on the opposite side of the market. Usually, once the genuine orders were filled, Cox cancelled the spoof orders. Cox repeated this trading pattern multiple times during the relevant period, primarily in the E-mini S&P 500 market and occasionally in the E-mini Nasdaq 100 market.
The CFTC’s investigation was conducted in conjunction with a related inquiry by the CME Group, which has also announced a disciplinary action against Cox.
Pursuant to an offer of settlement in which Cox neither admitted nor denied the rule violation upon which the penalty is based, a Panel of the CME Business Conduct Committee found that between June 1, 2017, and February 22, 2018, Cox entered and cancelled orders in the March 2018 E-Mini NASDAQ 100 futures and the June 2017, September 2017, December 2017, and March 2018 E-Mini S&P 500 futures markets without the intent to trade.
Specifically, the Panel found that Cox entered larger orders on one side of the order book to encourage trades opposite his smaller orders resting on the opposite side of the order book. After receiving a fill on the resting smaller orders, Cox cancelled the larger orders on the opposite side of the market. The Panel thus concluded that Cox thereby violated CME rules.
In accordance with the settlement offer, the Panel ordered Cox to pay a fine of $50,000. The Panel also suspended Cox from access to any CME Group trading floor and direct and indirect access to all electronic trading and clearing platforms owned or operated by CME Group for three weeks, beginning on July 31, 2019, and continuing through and including August 21, 2019.