LONDON: Regulators in Britain and the United States fined US trading firm Panther and owner Michael Coscia nearly $6m for manipulating commodities markets, marking one of the first crackdowns on abuses in automated trading.
Regulators are taking a tougher line on high-frequency (HFT) and other forms of automated trading blamed for exacerbating a so-called “flash crash” on Wall Street in May 2010, when blue chips went briefly into freefall.
High frequency traders use software known as algorithms to dart in and out of markets faster than the blink of an eye.
This is usually legal but Panther Energy Trading and Coscia were using the software to post and then cancel orders to profit from the false impression of activity in the market they had created, the regulators said.
Coscia said he had no comment.
The US Commodity Futures Trading Commission said Coscia placed and quickly cancelled thousands of bids and offers in futures contracts over three months, a method of trading known as layering or spoofing.
The watchdog fined Panther and Coscia $1.4m and forced them to pay back $1.4m in illegal profits on trades made between August 8, 2011 and October 18 of that year.
The US watchdog was using new powers under the Dodd-Frank reform of Wall Street. Panther and Coscia were also banned from trading on any CFTC-registered trading platform for an year.
“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,” CFTC enforcement director David Meister said.
REUTERS
