The U.S. Commodity Futures Trading Commission (CFTC) today announced charges against Mitsubishi Corporation RtM Japan Ltd. (RtM Japan) for engaging in a pattern of spoofing activity involving platinum and palladium futures contracts on the New York Mercantile Exchange. The alleged misconduct occurred between April 5 and April 13, 2018.
According to the CFTC, an inexperienced trader employed by RtM Japan placed numerous orders with the explicit intention of canceling them before they could be executed – a tactic known as spoofing. This trader, recently rotated to a precious metals trading desk from a business development role, lacked prior trading experience and was reportedly “testing the market” with these orders.
The scheme involved placing a large spoof order, followed quickly by a smaller, legitimate order intended for execution. Often, the legitimate order would be filled, and the spoof order would then be canceled before it could impact market prices. In some instances, the trader layered multiple spoof orders alongside genuine orders, further manipulating the trading landscape.
The CFTC order requires RtM Japan to cease and desist from further violations and imposes a civil monetary penalty of $500,000. However, the penalty was reduced due to RtM Japan’s cooperation with the investigation and proactive efforts to remediate the issues. These efforts included implementing an electronic trading monitoring system, overhauling its training program, and commissioning a third-party risk assessment for precious metals trading.
“Today’s enforcement action shows, once again, that the Commission will aggressively pursue spoofing in our markets,” stated James McDonald, CFTC Director of Enforcement. He also emphasized that companies are accountable for the unlawful trading practices of their employees, particularly when those employees are inadequately trained.
The CME Group’s Market Regulation Department conducted a parallel investigation and also announced disciplinary action against RtM Japan. The CFTC acknowledged and thanked the CME Group for its assistance in the matter. The case was led by CFTC staff members Philip Tumminio, Kara Mucha, and Rick Glaser.
Source: CFTC.gov
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