LONDON (CNN Money)- By Mark Thompson
High speed trader fined $3 million for commodity manipulation
Panther Energy 'spoofed' oil and commodity markets traded on CME exchanges.
Regulators have fined a U.S. high speed trading firm more than $3 million
for manipulating international markets in agricultural commodities and oil.
New Jersey-based Panther Energy Trading and its principal, Michael Coscia,
were fined a total of $3.1 million, and also ordered to hand over at least
$1.4 million in trading profits, for "spoofing" markets in crude oil,
natural gas and other commodities, such as wheat, soybean and corn.
Coscia was accused of using an algorithm to illegally place and quickly
cancel orders to buy and sell futures contracts traded on CME Group (CME)
exchanges and London's ICE during a two-month period, the regulators said.
Regulators said Coscia and his firm would place small sell orders they
wanted to execute, followed by several large buy orders at successively
higher prices that they intended to cancel, with the aim of artificially
inflating the price at which they could sell by creating an impression of
strong demand.
Once the sell order was filled by another market participant, Coscia would
cancel the buy orders and then reverse the process, racking up a profit
from the executions of small orders many times over between August and
October 2011.
"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," said David Meister, enforcement director at the U.S. Commodity
Futures Trading Commission.
Panther and Coscia have been banned from trading on any CTFC-registered
entity for a year, and from CME markets for six months.
The CFTC said this was the first case pursued under Dodd-Frank rules that
explicitly prohibit placing buy or sell orders with the intent to cancel
before executing the trade.
The total financial penalty includes a CFTC penalty of $1.4 million, a CME
fine of $800,000, along with a fine of about $900,000 imposed by the U.K.
Financial Conduct Authority for Coscia's deliberate manipulation of Brent
crude, gas oil and West Texas Intermediate futures contracts on the ICE.
High speed trader fined $3 million for commodity manipulation
Panther Energy 'spoofed' oil and commodity markets traded on CME exchanges.
Regulators have fined a U.S. high speed trading firm more than $3 million
for manipulating international markets in agricultural commodities and oil.
New Jersey-based Panther Energy Trading and its principal, Michael Coscia,
were fined a total of $3.1 million, and also ordered to hand over at least
$1.4 million in trading profits, for "spoofing" markets in crude oil,
natural gas and other commodities, such as wheat, soybean and corn.
Coscia was accused of using an algorithm to illegally place and quickly
cancel orders to buy and sell futures contracts traded on CME Group (CME)
exchanges and London's ICE during a two-month period, the regulators said.
Regulators said Coscia and his firm would place small sell orders they
wanted to execute, followed by several large buy orders at successively
higher prices that they intended to cancel, with the aim of artificially
inflating the price at which they could sell by creating an impression of
strong demand.
Once the sell order was filled by another market participant, Coscia would
cancel the buy orders and then reverse the process, racking up a profit
from the executions of small orders many times over between August and
October 2011.
"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," said David Meister, enforcement director at the U.S. Commodity
Futures Trading Commission.
Panther and Coscia have been banned from trading on any CTFC-registered
entity for a year, and from CME markets for six months.
The CFTC said this was the first case pursued under Dodd-Frank rules that
explicitly prohibit placing buy or sell orders with the intent to cancel
before executing the trade.
The total financial penalty includes a CFTC penalty of $1.4 million, a CME
fine of $800,000, along with a fine of about $900,000 imposed by the U.K.
Financial Conduct Authority for Coscia's deliberate manipulation of Brent
crude, gas oil and West Texas Intermediate futures contracts on the ICE.
14 comments:
placing unusual large orders also running the risk of being executed (by other algos), its like crossing the railroad track everyday.
this time, they were hit by er run away SMRT bus.
but after all being said, does cancelling orders, big or small, constitute a vailation?
certainly not.
just like the casino accusing card counting in black jack as cheat. why can't i count? did the rules say so?
how about a large refiner had to fill up his tank which is running dry, place 2 large orders in both CME and ICE futures but can only fill with 1 order, reason, he does not know which order he will get first or how much he can be filled, so he place 2 orders seperately.
upon CME order being fill, then a signal to cancel the hugh ICE order generated, will he be accuse of cancelling the ICE order too?
i think he is safe as long as he is not using algorithm!
Rules are rules, laws are laws.
What's manipulation of the market?
What they are doing definitely constitute a violation of trying to manipulate the market. It happen quite frequently in the past on our local futures contracts. It's still manipulated once in a while, as a trader, I can smell it, they are more discreet now.
hi fat! how are you? i thought we never hear you again.
no need to smell, can see it lives some more (occasionally). well, i don't want to judge them prematurely, if a very large and reputable trader says he is going buy so and so stocks and he didn't but causing the market to panic and prises rise, is he manupulating the market as well? where does the rule start or ends? where is the line?
system traders depends on signals to trade most of the time, some time when market turns, many signals will over ride each other, so what should the trader do? cannot cancel my orders?
Welcome back Fat!
Definitely one can cancel orders but it's the frequency. What they are doing is to distort the market and giving a false impression. That's why they were caught.
You can see this type of price action on our Simsci especially during the opening and data news.
ya i got it, it has to be very obvious and deliberate in order to get caught or procecuted.
but i have to say it happen everyday, if they stick to the rules without lineancy, almost half (or all) system traders will have to be out of businese.
ofcos, most system design is to profit and have no intention of decieving the market but every now and then, the action might also be interpreted as deceiving.
sometime in illiquide market, a 20 lot size can move the price a few bids on open or close!
Yes, 20 lots size can move the market now, most short term traders died, they were being devoured by the Algos. Most of the volume is contributed by the machines.
The success rate of a new trader is less than 1% now.
In order to succeed, join as a house trader or a proprietary trading firm.
one percent! actually thats what i thought all along.
new traders got to trade wider range, out of the slaughtering zone of the algos. but whenever the prices goes, the algos will follow, they still need to be firm with their executions.
talk about card counting of black jack, i'd watch the video of this card counting pro,
there are lots of similarity but there is also a bit of differences, one of which is the determination of odds (at any given time frame).
see if you can spot the same principles that you can apply in trading.
http://www.youtube.com/watch?v=sZOe4TLtV-Q
can card counting be executed in our 2 casinos, i heard we can't cos they resuffle the cards every deal is finished, is it true?
i'm looking for new advanture during the weekend, really bore where there is no market to trade, maybe i should try playing black jack in casinos.
I have never step into our two casinos basically because I know I am not able to win them. The odd is against me and I am not willing to pay the entrance fee.
But of course you can pay for having some fun and get yourself entertained.
Good luck to you!
oh i forgot about the entrence fees haha.
i heard some of the pro (like the "father" of card counting) went into wall street after they were kick out by the casinos, and was doing great.
i just want to highlight that there are actually many areas similar in trading and card counting professional. though i never really (like to) play black jack but it all make sense after watching how they make money from the casinos.
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