CME Group fines, suspends trader for spoofing futures markets
CME Group Inc said on Monday it fined a futures trader and suspended him from the company’s markets for entering orders he did not intend to execute, a practice known as spoofing.
CME fined Joel Stone a total of $62,000 for rule violations and barred him from accessing its markets for nearly the rest of July.
The complaint filing contained detailed allegations of spoof trades, in which Stone made large orders for futures transactions that he had no intention of completing. By placing large buy and sell orders that he never intended to fill, he sent a phony signal that tricked competitors and moved the market, allowing Stone to quickly cancel those orders and make real trades in the opposite direction, the complaint alleges.
Joel Stone had neither admitted nor denied the rule violations or factual findings forming the basis of the penalty. CME found that between September 4, 2020, and June 1, 2021, he engaged in a series of actions in the Corn, Wheat, and Soybean futures markets with the clear intention, at the time of order entry, of canceling the orders before they could be executed or modifying them to avoid execution once he received a corresponding fill in a correlated options market.
More specifically, Stone placed large orders on one side of the market in the Corn, Soybean, and Wheat futures while simultaneously having a resting options order that was for the same futures contract but with a direction that was opposite to his futures orders. Once Stone received a fill on his options order, he promptly canceled his big orders in their entirety.
As per the terms of the settlement offer, the derivative exchange’s panel ordered Stone to pay a fine of $30,000 plus the disgorgement of profits totaling $31,231.25. He will also serve 10-business day suspension from accessing any of CME Group’s trading floors, whether owned or controlled, as well as from engaging in direct or indirect transactions on any designated contract market, derivatives clearing organization, or swap execution facility operated by bourse. This penalty period will persist until August 4, 2023.
Spoofing, in general, is a practice in which a trader floods the market with fake orders by entering and quickly cancelling large buy or sell orders on an exchange, to fool other traders into thinking the market is poised to rise or fall. Though the tactic has long been used by some traders, regulators began clamping down on the practice only a few years ago.