Ex-BofA trader risks 20 years after pleading guilty to spoofing U.S. Treasuries

Rick Steves

Spoofing aims to create a false appearance of market depth and activity in order to mislead other traders, and to artificially raise or depress the prevailing market price in order to execute genuine orders more easily or more profitably.

NY-based Tyler Forbes, a former trader on the U.S. Treasuries desk of Bank of America, has pleaded guilty to manipulating U.S. Treasury securities prices from approximately January to June 2019.

He admitted he engaged in an unlawful “spoofing” scheme to manipulate the price of certain U.S. Treasury securities traded in the secondary (or “cash”) market — predominantly two and three-year U.S. Treasury notes, as well as 10-year U.S. Treasury notes.

Spoofing aims to mislead other traders

The spoofing strategy involved electronically placing large, non-bona fide “spoof orders” that he intended to cancel prior to execution on one side of the market, while simultaneously entering smaller, genuine orders that he intended to execute on the opposite side of the market.

Genuine orders were “iceberg” orders, meaning that only a portion of the order’s full size was visible to other market participants at any given time, whereas all of Forbes’s spoof orders were fully displayed.

Spoofing aims to create a false appearance of market depth and activity in order to mislead other traders, and to artificially raise or depress the prevailing market price in order to execute genuine orders more easily or more profitably.

Now, Tyler Forbes faces a maximum penalty of 20 years in prison. He is scheduled to be sentenced on July 28 in the Eastern District of New York.

CFTC charged Global AG’s David Skudder for spoofing

Last week, the CFTC charged Global AG’s David Skudder for spoofing soybean futures contracts and options on soybean futures contracts traded on the Chicago Board of Trade.

According to the regulator, some of the misconduct involved cross-market spoofing, in which two correlated markets are used for the manipulative scheme.

David Skudder is a founder of Global AG, a registered commodity trading advisor. Skudder is also a registered associated person of Nesvick, a registered introducing broker.

The CFTC alleges that between September 2014 and March 2019, David Skudder placed hundreds of large orders for soybean futures that he intended to cancel before execution (spoof orders) while placing orders on the opposite side in the soybean futures market, or cross-market in the options on soybeans futures market (genuine orders), that would benefit from market participants’ reactions to his spoof orders.

David Skudder allegedly deceived other traders about supply and demand, misleading market participants about the likely direction of the commodity’s price, which made his genuine orders appear more attractive to market participants and allowed him to execute his genuine orders in larger quantities and at better prices than he otherwise would have, absent the spoof orders.

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