Eric Oscher and Briargate Trading, LLC, a company 50 percent owned by Mr. Oscher, agreed to pay an aggregate fine of US $500,000 and disgorge profits of $525,000 to resolve charges brought by the Securities and Exchange Commission that they engaged in prohibited spoofing activities involving securities listed on the New York Stock Exchange from October 2011 through September 2012.
According to the SEC, during this time, Mr. Oscher caused his company to place a series of large, non-bona fide orders to buy or sell certain stocks prior to NYSE market open (the SEC termed these non-bona fide orders “spoofs”). The intent of these orders, claimed the SEC, was to drive the price of the stock up or down in the pre-open period by contributing to a perception that there was a large buying or selling interest.
Briargate would then place orders in the opposite direction of its spoofs on other markets that listed the same stock but that opened prior to NYSE. After these bona fide orders were executed, Mr. Oscher would have Briargate cancel its NYSE pre-market open orders. He would then cause Briargate to liquidate its executed positions after the relevant stock price reacted to elimination of the large non-bona fide buying or selling interest.
Mr. Oscher and Briargate engaged in this type of trading activity in 242 instances during the relevant time, realizing US $525,000 in profits, said the SEC.
The SEC claimed that Mr. Oscher began utilizing this trading strategy in October 2011 after he had complained to NYSE,
…that other market participants were engaging in manipulative conduct involving large cancelled orders. For example, in the spring of 2011, Briargate complained to the NYSE that the data feeds provided by the NYSE were “susceptible to manipulation where parties look to gain advantage by entering non bona fide orders to entice others to trade.”
The SEC claimed that defendants trading was “manipulative” and thus violated provisions of law that prohibit engaging in transactions “creating actual or apparent actual trading” in a relevant security “or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others.” The SEC also charged that defendants’ trading constituted a device, scheme or artifice to defraud or was an act or practice that operates as a fraud or deceit.
The defendants also agreed to pay prejudgment interest of almost US $38,000 as part of their settlement.