Articles Tagged with CFTC

AdobeStock_112465076-1-300x164According to the Wall Street Journal, the amount of penalties imposed by the SEC, FINRA and the CFTC have plummeted in the first half of 2017 in comparison to the first half of 2016. Regulators are on track for the lowest annual level of fines since at least 2010. Fine amounts have dropped from $1.4 billion in the first half of 2016 compared to $489 million for the first half of 2017. The deregulatory, hands off approach of the Trump administration is one major reason for this drop. SEC chairman Jay Clayton has previously expressed concern about the size of corporate fines, arguing they have hurt shareholders. Another reason is Wall Street’s successful lobbying of FINRA to reduce the size of the fines imposed. The seeds for the next bubble that devastate millions of investors are being planted.


The U.S. attorney’s office in Chicago is cracking down on “spoofing.” Spoofing is an illegal practice in which traders profit from placing orders they intend to cancel, at times only milliseconds later. Chicago is at the epicenter of the futures market, and therefore, is emerging at the forefront of the criminal and civil litigation in this matter. Earlier this month, in the U.S. District Court in Chicago, the first criminal conviction of a spoofer was won. The Commodity Futures Trading Commission is pressing civil spoofing charges against a Chicago trading firm and the CFTC lodged civil charges last month against Chicago-based 3Red Trading and its owner, Igor Oystacher. Firms such as Citadel, Jump Trading, DRW Holdings and Allston Trading have made Chicago a hub for high-speed trading and are aggressive in worldwide financial markets. One recent example was Panther Energy Trading’s Michael Coscia, who was found guilty by a jury on 12 criminal counts on November 3rd, and his case hinged on content, as he admitted that he cancelled tens of thousands of orders over a nine-week period in 2011.

Rival firms are bringing each other to court on spoofing charges and incriminating each other. Citadel filed multiple complaints with the CFTC and CME regarding anonymous trading that was traced to 3Red. Citadel claimed they lost millions of dollars as a result of 3Red’s actions. The firm also complained about Panther’s trading and a Citadel employee testified for the prosecution in the Coscia trial. High-speed firms are suing each other in Chicago federal court, as well. HTG Capital Partners sued “John Doe” over spoofing and is trying to reveal the name of the culprit.

The U.S. Commodity Futures Trading Commission (CFTC) issued an Order required Morgan Stanley to pay a $300,000 civil monetary penalty for failing to hold insufficient U.S. Dollars in accounts to meet all obligations to its cleared swaps customers. Morgan Stanley also failed to implement adequate procedures. The CFTC also required the firm to cease and desist from violating any other CFTC Regulations. This comes on the heels of the CFTC implementing rules to protect swaps customers and market participants including rules for protection of cleared swaps after the passage of the Dodd-Frank Wall Street Reform rule and Consumer Protection Act.

Morgan Stanley is accused of failing to hold sufficient U.S. Dollars in segregated U.S. accounts to meet obligations to the firm’s cleared swap customers for the time period of March 12, 2013 until March 7, 2014. During this time period, Morgan Stanley held dollar deficits in Euros and other currencies, rather than in U.S. dollars. The deficit ranged from $5 million to $265 million, sometimes representing more than 10% of the amount that the firm was obligated to maintain for its customers. It also did not have proper procedures in place to supervise its personnel, and did not train its personnel accordingly to comply with CFTC rules and regulations.

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