CHICAGO Futures market operator CME Group Inc plans to broaden its rules against wrongdoing at the
request of federal regulators, the company said on Friday, a
move that is expected to ramp up disciplinary action against
Traders who engage in the manipulative practice known as
spoofing are “the most immediate and likely target” of the rules
changes, said Craig Pirrong, a finance professor at the
University of Houston.
The U.S. Commodity Futures Trading Commission asked CME to
include attempts to manipulate markets and engage in other types
of fraudulent behavior in its list of general offenses,
according to a notice the company sent to customers.
The owner of the Chicago Board of Trade and other exchanges
has previously prohibited manipulation, fraud and other “bad
faith” actions, but attempts at such activities were not
CME declined to comment beyond the notice. The CFTC had no
Regulators have focused in recent years on fighting
spoofing, after a provision against it was implemented as part
of the 2010 Dodd-Frank financial reform.
The practice typically involves using computer algorithms to
influence market prices by placing electronic orders with the
intent to cancel them before execution.
CME will have more latitude to pursue spoofers and other
rogue traders under its expanded rules, Pirrong said.
“It is significant because it lowers the bar of proof and
therefore makes it more likely that the CME will pursue these
sorts of cases,” he said about the change.
“The CFTC has long been quite concerned about the high
standard required to prove manipulation.”
CME, a self-regulatory organization, fines firms and
individuals, and suspends and bans them from its markets for
violations ranging from failing to supervise employees to wash
trading, in which traders sell contracts to themselves to make a
market look more active than it is.
By making attempts to engage in fraudulent or bad-faith
actions into general offenses, CME’s rule book “more closely
tracks the prohibitions set forth” by the CFTC, according to the
company’s notice. The changes are set to take effect on Feb. 16.
In December, CME raised the maximum possible fine for rule
breakers to $5 million per offense from $1 million in a bid to
A month earlier, a British trader, Navinder Sarao, became
the second person convicted of criminally spoofing U.S. futures
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