CFTC Says Alleged Spoofers Trading Leads to New Complaints

(Bloomberg) — Commodities regulators suing alleged spoofer Igor Oystacher said some of his trading activity this month has generated new complaints about market manipulation.

The Commodity Futures Trading Commission asked a federal judge in Chicago Thursday to let it expand its probe of Oystacher and his firm,3Red Trading LLC, after receiving complaints about his trades of Ten Year T-Note Treasury Futures. The CFTC is seeking to limit Oystachers trading while it sues him over claims he manipulated market prices by placing and canceling orders without intending to complete them.

Regulators have been cracking down on spoofing, the practice of placing large orders on one side of the market to influence prices, canceling those orders and then putting orders on the other side to get a more favorable price. Spoofing is banned because it can trick other traders into thinking prices are poised to move, spooking them into nudging prices in the direction sought by a cheater.

The lawsuit against Oystacher currently covers trading activity over 51 days from 2011 to 2014. CFTC lawyers said in a court filing Thursday that two market participants complained about spoofing in Treasury futures on Feb. 2 and Feb. 3 and that the activity was traced to Oystacher.

The CFTC is seeking to introduce evidence of the most recent trading activity during a hearing in April to support its argument that Oystacher should be barred from trading in the futures markets while the case against him is being decided, an effort that Oystachers lawyers have opposed. Oystacher and 3Red have denied the CFTCs allegations.

We believe a fair and impartial review of each event at issue will demonstrate the orders are completely lawful and within the bounds of the CFTCs own rules and regulations, Tom Becker, an outside spokesman for 3Red and Oystacher, said in an e-mailed statement. It is unfortunate that the CFTC is relying on complaints made by certain of our firms competitors to attempt to expand the scope of an investigation that has been misguided from the outset.‎

CFTC Chairman

CFTC Chairman Timothy Massad said Wednesday in testimony at a House budget hearing that the agency doesnt have the budget to frequently inspect the firms and exchanges it regulates, or to pursue all the enforcement cases that it would like to — including spoofing and precious-metals scams.

In November, trader Michael Coscia became the first person to be convicted of spoofing after going on trial in federal court in Chicago. The jury found him guilty after deliberating for about an hour.

The case is U.S. Commodity Futures Trading Commission v. Oystacher, 15-cv-09196, U.S. District Court, Northern District of Illinois (Chicago).