On March 4, the Commodity Futures Trading Commission (CFTC) Whistleblower Program posted a Notice of Covered Action (NCA) for enforcement actions charging an Australian-based proprietary trading firm, Propex Derivatives Pty Ltd, and trader, Jiongsheng Zhao, with spoofing in the Chicago Mercantile Exchange E-mini S&P 500 futures market.
According to the CFTC, from at least July 2012 through at least March 2017, Zhao “repeatedly engaged in manipulative or deceptive acts and practices by ‘spoofing’” on behalf of Propex. Spoofing is the act of placing an order in a futures market with the intention to cancel the order prior to execution.
The CFTC alleges that “[o]n thousands of occasions, Zhao placed an order that he wanted to execute and thereafter entered a larger order on the opposite side of the market that he intended to cancel before execution. In placing these larger spoof orders, Zhao intentionally or recklessly sent false signals of increased supply or demand designed to trick market participants into executing against the orders he wanted filled.”
The CFTC’s order filing and settling the charges against Propex includes a total of $1 million in sanctions. Propex will pay $464,300 in restitution, $73,429 in disgorgement, and a $462,271 civil monetary penalty. Zhao will pay an additional $21,000 in disgorgement.
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