Washington, D.C. – The Bank of Nova Scotia (BNS) has agreed to pay an $800,000 penalty to settle charges brought by the Commodity Futures Trading Commission (CFTC) for engaging in spoofing – a form of market manipulation – involving gold and silver futures contracts. The manipulative activity occurred on the Chicago Mercantile Exchange (CME) between June 2013 and June 2016.
According to the CFTC’s order, traders on BNS’s precious metals desk employed a strategy where they placed orders with no intention of executing them. These “spoof orders” were designed to create a false impression of market demand or supply, enticing other traders to fill smaller, legitimate orders – known as “genuine orders.”
The scheme involved placing a small genuine order alongside a much larger, deceptive order on the opposite side of the market. This tactic aimed to artificially influence prices by making it appear as though significant buying or selling pressure existed, ultimately benefiting the bank through the execution of the genuine order.
The CFTC noted that BNS self-reported the misconduct after being alerted by its Futures Commission Merchant and promptly cooperated with the investigation. This proactive approach led to a “substantially-reduced penalty,” according to CFTC Director of Enforcement James McDonald. “We expect market participants to take proactive steps to prevent this sort of misconduct,” McDonald stated.
In addition to the monetary penalty, BNS is required to implement enhanced training programs and internal controls to detect and prevent future instances of spoofing. The CFTC acknowledged the assistance provided by the CME Group, Inc. during the investigation. The case was handled by the CFTC’s Spoofing Task Force, led by staff members including Greta Gao and Jonah McCarthy.
Source: CFTC.gov
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