The regulator is charging that two Citigroup Global Markets Inc. traders were spoofing clients in U.S. Treasury futures markets.
The CFTC has issued two separate but related orders settling charges against Stephen Gola and Jonathan Brims for spoofing — generally defined as “bidding or offering with the intent to cancel the bid or offer before execution” — in U.S. Treasury futures markets while trading for Citigroup Global Markets Inc. (CGMI).
The actions against the two traders follow a Jan.19, 2017 order against CGMI itself for its “related violations of the Commodity Exchange Act and Regulations.” (For more about that order, go to the FTF News story)
Under the more recent order CFTC order, Gola, a former managing director for CGMI, is required to pay a $350,000 civil monetary penalty, and Brims, a former vice president for CGMI, is required to pay a $200,000 civil penalty.
Both traders are banned from trading in the futures markets until six months “after each trader has made full payment of his respective penalty. In addition, Gola and Brims are ordered to cease and desist from violating the Commodity Exchange Act’s prohibition against spoofing, as charged.”
Specifically, the CFTC finds that, between July 16, 2011 and December 31, 2012, “Gola and Brims each engaged in the disruptive practice of spoofing more than 1,000 times in various Chicago Mercantile Exchange (CME) U.S. Treasury futures products.”
Their spoofing strategy, the CFTC says, “involved placing bids or offers of 1,000 lots or more with the intent to cancel those orders before execution. The spoofing orders were placed in the U.S. Treasury futures markets after another smaller bid or offer was placed on the opposite side of the same or a correlated futures or cash market.”
They made their spoofing orders to “create or exacerbate an imbalance in the order book and cancelled their spoofing orders after either the smaller resting orders had been filled or the traders believed that the spoofing orders were at too great a risk of being executed,” the CFTC finds.
In addition to their owns spoofs, Gola and Brims “coordinated with one or more Citigroup traders on the U.S. Treasury Desk to implement the spoofing strategy by, in some of those instances, placing one or more spoofing orders after another trader had placed one or more smaller resting orders in the same or a correlated futures or cash market,” the CFTC says, adding that at other times “another trader would place spoofing orders to benefit smaller resting orders of Gola and Brims.”
That other trader, who “called other members of the U.S. Treasury desk, including Gola to discuss the trade,” was based in Hong Kong, the CFTC says.
Both Gola and Brims are settling with the commission “[w]ithout admitting or denying any of the findings or conclusions herein,” the two CFTC settlement orders note.
Officials at Citigroup declined to provide further comment on the matter.
The CFTC orders pertaining to Gola and Brims are available in full via the regulator’s website.
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