Xian Qun Tang and Antonia Simoes, non-members, were adjudged by a business conduct committee of the Commodity Exchange, Inc. of engaging in spoofing-type transactions involving the placement and cancellation of layered orders on one side of the market without the intent to execute such orders. Neither person answered formal charges levied against them by Comex.

Mr. Tang was required to pay a fine of US $50,000 and disgorge profits of over US $35,000. Ms. Simoes was required to pay a US $50,000 fine. Both respondents were also permanently barred from trading on any CME Group exchange.

Compliance Weeds: The use of iceberg orders – where only a portion of a trader’s order is visible to the marketplace— is not by itself considered to be a disruptive market practice. However, when utilized as part of a scheme to mislead other market participants, the use of iceberg orders can be cited by a regulator to help demonstrate the intent of a market participant to mislead others in violation of applicable rules. (Click here to access CME Group Market Regulatory Advisory Notice RA1516-5, Q/A 9.)

In 2016, ICE Futures U.S. charged another trader with a violation of its market disruption prohibitions because on multiple occasions the trader engaged in a “pattern of activity” where he would enter an iceberg order at the best bid or offer. He would then enter a large fully displayed order on the opposite side of the market that “appeared to create artificial pressure and appeared to mislead market participants into trading opposite the pre-positioned iceberg order,” alleged IFUS. IFUS claimed that the trader would then cancel his large order within seconds of his iceberg order being executed. (Click here for more details in the article “IFUS Charges Trader With Possible Spoofing and Market Disruption While Another Entity Is Charged With Allegedly Liquidating Positions in a Disorderly Fashion to Avoid Speculative Limits Issues” in the March 13, 2016 edition of Bridging the Week.)