On 3 and 22 July 2013, the UK and US authorities, respectively, fined the high-speed trading firm, Panther Energy Trading, and its owner, Michael Coscia, for attempting to manipulate futures markets by using an algorithmic programme which placed and rapidly cancelled bids on commodity contracts, a practice known as “layering” or “spoofing”. The FCA found that this was done “with the intention of creating a false impression as to the weight of buyer or seller interest thereby ‘layering’ the order book and manipulating the market.”
The findings determined that during the period 6 September 2011 and 18 October 2011 Panther ‘spoofed’ 18 separate US futures markets, including oil, soya beans and wheat and made numerous false orders for crude oil and gas contracts on the ICE Futures Europe Exchange. Tracy McDermott, the FCA’s director of enforcement and financial crime, commented that “these techniques were deliberately designed to abuse the market undermining its integrity.”
The US Commodity Futures Trading Commission fined Mr Coscia $2.8 million in trading profits and banned him from trading for one year for the US offences. The exchanges operator, CME Group, imposed fines amounting to $2.1 million. The FCA considered that Mr Coscia’s behaviour amounted to market abuse (market manipulation) contrary to section 118(5) of the Financial Services and Markets Act 2000 and imposed a fine of £597,993 (Stage 1: 30%) and a six-month trading ban on its exchanges. This is the first time the FCA has taken enforcement action against a high-frequency trader.