Dominick Minervini, a former floor broker registered with the Commodity Futures Trading Commission, agreed to pay a fine of US $200,000 to ICE Futures U.S. to resolve charges that, between April 2016 and August 2016, he may have engaged in impermissible spoofing-type activity involving Sugar No. 11 futures contracts. According to IFUS, Mr. Minervini, on numerous occasions, created “order book imbalances” by entering a small order to buy or sell on one side of the market, and a large order to sell or buy on the other side of the market. The exchange claimed that on “numerous instances” Mr. Minervini would cancel the large order after the small order was executed. In addition to paying a fine to resolve this matter, Mr. Minervini agreed to disgorge profits in excess of US $17,500 and be suspended from trading on IFUS markets for 150 days. In 2009, Mr. Minervini agreed to pay a fine of US $150,000 to IFUS for allegedly engaging in wash trades and attempting to manipulate the price of Frozen Concentrated Orange Juice futures settlement prices on nine occasions (click here for background), while in 2010, Mr. Minervini consented to pay a sanction of US $85,000 to the exchange for purportedly engaging in wash trades and accommodation trades in 120 incidents (click here for background).
Compliance Weeds: This appears to be an unusual case where a person charged under an anti-spoofing provision was alleged, on each occasion, to have placed only a single large order on the opposite side of a market from a small order. Apparently, as intimated by IFUS’s Disciplinary Notice, the order book imbalances caused by the single large and one opposite small orders were sufficient to induce execution of the small orders. Previous enforcement actions alleging spoofing typically have involved multiple layered orders on one side of the market used to cause an artificial increase or decrease in prices in order to facilitate the execution of a single smaller order on the other side. (Click here for a background on a more conventional enforcement action involving spoofing in the article “Federal Appeals Court Upholds Conviction and Sentencing of First Person Criminally Charged for Spoofing Under Dodd-Frank Prohibition” in the August 8, 2017 edition of Between Bridges.)