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European banks pay $46.6 million to settle US 'spoofing' charges

01 February 2018

Deutsche Bank, UBS and HSBC will collectively pay almost $47 million to settle civil regulatory charges some of their traders engaged in spoofing in precious metals.

In its continuing litigation, the CFTC seeks civil monetary penalties, permanent registration and trading bans, disgorgement, and a permanent injunction against further violations of the Commodity Exchange Act and CFTC regulations, as charged.

CFTC alleges that the banks manipulated the pricing of the USA futures market through so-called "spoofing", whereby a market participant is placing bids to buy a futures contract with the intent to stop it before its execution, "Reuters" said.

In one of the cases, the CFTC fined Andre Flotron, a former UBS precious metals trader in Stamford, Conn., and Zurich, with concocting a spoofing scheme for personal and corporate profit.

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The case centres on allegations that defendants and co-conspirators placed hundreds, or thousands of orders that they did not intend to trade.

"Conduct like this poses significant risk of eroding confidence in USA markets and creates an uneven playing field for legitimate traders and investors", acting assistant attorney general John P. Cronan said in a statement.

Deutsche Bank and UBS have agreed to pay $30 million and $15 million respectively to settle the civil charges in the case, while HSBC will pay $1.6 million, the CFTC said.

A spokesman for HSBC said the bank was pleased to have resolved the matter.

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James McDonald, director of enforcement at the CFTC, which regulates derivatives markets, said electronic and algorhythmic trading had created opportunities both for legitimate trading, which CFTC supported, and for fraud. The Deutsche Bank trader David Liew pleaded guilty on June and has cooperated with investigators since.

"We are equally committed to identifying and punishing these bad actors", he said in a statement.

Jitesh Thakkar of IL has been charged with developing a software program used by his co-conspirator to engage in spoofing, the Justice Department said. Edward Bases, 55, and John Pacilio, 53, both of CT and based in New York City, were charged in a criminal complaint with commodities fraud.

Bases, Pacilio, Mohan and Thakkar were arrested by US law enforcement on Monday, while Zhao was arrested by Australian authorities. It is a growing problem as traders rely more and more on algorithms to execute trades.

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European banks pay $46.6 million to settle US 'spoofing' charges