Simon Posen agreed to pay a fine of US $635,000 and never to trade on markets overseen by the Commodity Futures Trading Commission to resolve CFTC charges that he engaged in spoofing-type conduct from December 2011 through March 2015. According to the CFTC, during this time, on multiple occasions, Mr. Posen would enter one or more large orders or a series of layered orders on one side of Copper, Crude Oil, Silver or Copper Futures markets in order to suggest increasing or decreasing market price interest, and one or more similar small orders on the other side of the same market (or an iceberg order for a larger quantity but with only a small quantity publicly visible). After the smaller-sized orders were executed, Mr. Posen would cancel the larger-sized orders. The CFTC said that Mr. Posen typically traded during off-peak hours when markets were less liquid. After executing a trade, Mr. Posen would often repeat his process to liquidate the transaction, claimed the Commission. Mr. Posen’s transactions occurred on the Commodity Exchange, Inc. and New York Mercantile Exchange. In 2015 business conduct committees of both exchanges resolved disciplinary actions with Mr. Posen related to the same conduct, albeit for a shorter period of time – September 2013 through February 2014. Mr. Posen agreed to settle his two exchange matters by payment of an aggregate US $75,000 fine and a CME Group-product five-week trading ban. (Click here for details in the article “Causing 'Atypical Price Activity' in Gold Futures Results in US $200,000 Fine by COMEX” in the June 21, 2015 edition of Bridging the Week.) Mr. Posen also settled another disciplinary action in November 2016 with COMEX for overlapping conduct from November 2014 through March 2015. In connection with this disciplinary action, Mr. Posen agreed to pay a fine of US $90,000 and incur a four-week CME Group trading suspension. (Click here for background in the article “COMEX Member Settles Disciplinary Action Alleging Spoofing-Type Activities; ICE Futures Trader Agrees to Settle Alleged Position Limits Violation” in the December 4, 2016 edition of Bridging the Week.)

My View: The CFTC’s enforcement action in this matter appears unwise particularly in light of the agency’s precarious financial circumstances and limited resources. Unless self-regulatory organizations have insufficient jurisdiction to address trading-based infractions on their facilities that span other exchanges or involve extraordinary wrongdoing, it’s not clear what the marginal benefit is of the CFTC bringing a me-too enforcement action. Here, where Mr. Posen was subject to hefty CME Group exchanges’ sanctions for alleged spoofing-type conduct, an additional CFTC action appears unwarranted. If the CFTC is dissatisfied with the way an SRO handles infractions, the more appropriate forum to address this is through periodic rule reviews. (Click here for background on the CFTC’s FY 2018 budget request and current financial circumstances in the article “Commissioner Bowen Votes to Process CFTC 2018 Budget Proposed by Acting Chairman Despite Disapproval” in the June 4, 2017 edition of Bridging the Week.) The CFTC’s enforcement action a few weeks ago in light of a disciplinary action this week by the CME against Rosenthal Collins Capital Markets LLC raises similar concerns. (Click here for background on this matter in the article “Trader Settles COMEX Disciplinary Actions for Failure to Supervise for Employee’s Alleged Spoofing Activity” in this week’s edition of Bridging the Week.)