Chicago, IL – The Commodity Futures Trading Commission (CFTC) has levied a $1 million penalty against Australian-based proprietary trading firm Propex Derivatives Pty Ltd for engaging in spoofing activities in the Chicago Mercantile Exchange E-mini S&P 500 futures market. The firm, through a former trader, allegedly manipulated the market between July 2012 and March 2017, resulting in $464,300 in losses for other market participants.
The CFTC order mandates Propex pay $464,300 in restitution to those impacted by the spoofing, alongside $73,429 in disgorgement – effectively returning ill-gotten gains – and a $462,271 civil monetary penalty. The firm is also required to cease and desist from further violations of the Commodity Exchange Act’s anti-spoofing provisions.
Spoofing, as defined by the CFTC, involves placing orders with the intent to cancel them before execution, creating a false impression of market demand or supply. In this case, Propex’s trader allegedly placed large “spoof” orders – often five times the size of genuine orders – on one side of the market, while simultaneously placing legitimate orders on the other. These spoof orders were then quickly cancelled, often after the legitimate orders were filled, manipulating the price and deceiving other traders.
This enforcement action is part of the CFTC’s Spoofing Task Force initiative, demonstrating a coordinated effort with other law enforcement agencies. Simultaneously, the Department of Justice Fraud Section announced a Deferred Prosecution Agreement with Propex, deferring criminal prosecution on a spoofing charge. The investigation received assistance from the Federal Bureau of Investigation and the Australian Securities and Investments Commission.
“This enforcement action demonstrates, once again, the continued parallel efforts between the CFTC and our law enforcement partners to preserve market integrity and protect market participants,” stated CFTC Director of Enforcement James McDonald. “This action also shows the CFTC’s commitment to holding wrongdoers accountable wherever they may be located, including halfway around the globe.”
The CFTC staff members involved in the case include Nicholas Sloey, Allison Sizemore, Jordon Grimm, Christopher Reed, Charles Marvine, and former staff member Laura Brookover.
Source: CFTC.gov
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