The CFTC has announced charges against New Jersey-based Panther Energy Trading and its principal, Michael Corsica, for “spoofing” markets in crude oil, natural gas, and other commodities such as wheat, soybean and corn. Panther Energy and Corsica agreed to pay a $1.4 million fine, return $1.4 million in ill-gotten gains, and stop trading for a year as part of the settlement.
The U.K.’s Financial Conduct Authority also announced it has fined Corsica more than $900,000 for alleged manipulation of commodities markets.
The charges mark commodities regulators’ first case using new enforcement powers granted under the Dodd-Frank financial law against spoofing. The 2010 law overhauled market oversight after largely unregulated trades helped fuel the 2008 credit crisis.
CFTC Comisssioner Bart Chilton said in a statement that, “Spoofing sends false signals to markets in order to lure prey and game the system. With ultra-fast cheetah technology, false market signals take places within milliseconds. The good news is that regulators around the world are starting to catch up with the cheetah traders and we are shutting them down when they violate the law.”
The CFTC alleges that Panther and Corsica engaged in illegal activity while trading 18 futures contracts on four exchanges owned by the CME Group.
According to the CFTC, Corsica used a computer algorithm to quickly place and cancel orders to buy and sell futures contracts for nearly three months in 2011. Corsica and his firm would place small sell orders they wanted to execute, followed by several large buy orders at rising prices that they intended to cancel, in order to artificially inflate the price at which they could sell by fabricating an impression of strong demand.
Once the sell order had been bought, Corsica would cancel the buy orders and then reverse the process, profiting from the executions of small orders.
David Meister, the CFTC’s Enforcement Director, said, “While forms of algorithmic trading are of course lawful, using a computer program that is written to spoof the market is illegal and will not be tolerated. We will use the Dodd Frank anti-disruptive practices provision against schemes like this one to protect market participants and promote market integrity, particularly in the growing world of electronic trading platforms.”