(Bloomberg) — CME Group Inc. fined a trader, James Groth, $55,000 and suspended him for 10 days for spoofing, a form of market manipulation thats received a flood of recent attention because of allegations it helped spur the 2010 flash crash.
From May 2011 through October 2011, Groth placed orders for Treasury futures without intending to actually complete the transactions, according to Chicago-based CME, which runs the exchange where the futures contracts trade.
Groth neither admitted nor denied the allegations, according to CMEs disciplinary action. He didnt respond to an e-mail or voicemail message seeking a comment.
Spoofing is banned because it can trick other traders into thinking prices are poised to move, spooking them into nudging prices in the direction the cheater prefers. In April, U.S. prosecutors accused Navinder Singh Sarao of engaging in the technique for years and helping spur the flash crash, which erased almost $1 trillion from U.S. stocks in minutes in May 2010.
CME said Groth entered large orders designed to trick other traders into thinking there was an imbalance between buying and selling interest. Once prices started moving in response, smaller orders that hed separately placed were completed, according to CME.
Groth entered these large orders for the purpose of inducing other market participants to trade opposite his smaller resting orders, the exchange said, adding that this was a violation of its rules.
The Treasury Market Practices Group, an advisory committee backed by the Federal Reserve Bank of New York, wants investors, brokerages and markets to ensure theyre actively working to prevent manipulative strategies in U.S. Treasuries such as spoofing, according to a paper released in April.
