Navinder Singh Sarao, of Illinois, has been ordered to pay $25,743,174.52 in civil penalties and $12,871,587.26 in disgorgement following a judgment entered by Judge Andrea R. Wood of the U.S. District Court for the Northern District of Illinois on November 17, 2016. The Commodity Futures Trading Commission (CFTC) brought the enforcement action against Sarao and his company, Nav Sarao Futures Limited PLC, alleging unlawful market manipulation.
The CFTC charged Sarao with manipulating, attempting to manipulate, and spoofing the E-mini S&P 500 near month futures contract traded on the Chicago Mercantile Exchange (CME). The E-mini S&P 500 is a widely traded stock market index futures contract based on the Standard & Poor’s 500 Index.
According to the court order, Sarao admitted to the allegations outlined in the CFTC complaint. The court found that Sarao engaged in a scheme to manipulate the price of the E-mini S&P 500 using both automated and manual spoofing tactics. These tactics were designed to create artificial price swings that Sarao could then exploit through his trading.
The scheme involved a dynamic layering program that placed large sell orders in the E-mini S&P order book, spaced closely together. These orders were repeatedly modified to prevent execution, and were ultimately cancelled. Sarao also allegedly used a “back-of-queue” program to place large orders designed to influence prices without being filled, and employed manual spoofing techniques, placing and cancelling large orders with no intention of them being executed.
The CFTC alleged that these spoof orders created a false impression of supply and demand, inducing other market participants to trade at prices they otherwise wouldn’t have. CFTC Director of Enforcement Aitan Goelman stated that Sarao’s actions distorted prices over several years and harmed other market participants.
In addition to the financial penalties, the court permanently prohibits Sarao from further violations of the Commodity Exchange Act (CEA) and CFTC Regulations, and imposes permanent trading and registration bans.
Source: CFTC.gov
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