Washington, DC – The Commodity Futures Trading Commission (CFTC) settled charges on January 29, 2018, against HSBC Securities (USA) Inc. (HSBC) for engaging in spoofing related to gold and other precious metals futures traded on the Commodity Exchange, Inc. (COMEX). The alleged misconduct was carried out by one of HSBC’s traders based in New York.
The CFTC order requires HSBC to pay a $1.6 million civil monetary penalty. Additionally, HSBC must cease and desist from violating the Commodity Exchange Act’s prohibition against spoofing and implement enhanced training, systems, and controls to prevent future misconduct by its personnel. The CFTC acknowledged HSBC’s cooperation throughout the investigation, which resulted in a reduced penalty.
According to the order, between July 16, 2011, and August 2014, the HSBC trader engaged in a manipulative trading strategy known as spoofing. The trader allegedly placed orders for precious metals futures, primarily gold, with the intention of canceling them before execution. This involved placing a small “resting order” and then a larger “spoof order” on the opposite side of the market, intending to cancel the spoof order before it could be filled. The trader would often receive a partial or complete fill of the resting order before canceling the spoof order.
The CFTC contends this practice violated the Commodity Exchange Act. James McDonald, the CFTC’s Director of Enforcement, stated that spoofing “poses a significant threat to the integrity of our markets,” and emphasized the importance of investigating and prosecuting such misconduct. He also highlighted the value of cooperation, noting that HSBC benefitted from its substantial cooperation in the investigation.
The CFTC received assistance in the investigation from the U.S. Department of Justice, the Federal Bureau of Investigations, the Chicago Mercantile Exchange, Inc., and the UK Financial Conduct Authority. The case was handled by the CFTC Division of Enforcement’s Spoofing Task Force.
Source: CFTC.gov
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