Three European banks to pay $46m for 'spoofing' market

Three European banks to pay $46m for 'spoofing' market

CFTC alleges that the banks manipulated the pricing of the US futures market through so-called "spoofing", whereby a market participant is placing bids to buy a futures contract with the intent to stop it before its execution, "Reuters" said.

Reuters reported yesterday HSBC, UBS and Deutsche Bank, as well as former traders at the banks and individuals at other firms, were charged following a large-scale multi-agency probe including the Commodity Futures Trading Commission into "spoofing" in metals and equities futures.

Investigators looked into whether traders at the banks had worked to manipulate futures markets in precious metals.

Andre Flotron, 53, a Swiss national living in New Jersey, has been charged with conspiracy to commit spoofing and fraud when he was a UBS AG precious metals trader in Switzerland. UBS had provided its futures traders, including Mr. Flotron, with automated trading software that allowed them to "place, modify, and cancel multiple orders almost simultaneously", according to a criminal indictment filed in September.

A rare charge: Only three people had previously ever been charged with spoofing. The orders create the illusion of demand, which distorts prices in a way that benefits the trader's positions.

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HSBC Holdings (LON:HSBA) has agreed to pay $1.6 million over a "spoofing" probe in the US.

Criminal charges also were filed in federal court in Chicago against James Vorley, 37, of the United Kingdom, and Cedric Chanu, 39, a French citizen, who are accused of placing orders for gold, silver, platinum or palladium futures contracts on the futures exchange owned by the CME Group.

Mr. Flotron's lawyer, Marc Mukasey, said the new case "is an especially enormous waste of taxpayers' money because the CFTC knows darn well that there is a pending criminal matter, that Mr. Flotron has always been retired from the business, and that he lives in Switzerland".

Rob Sherman, a spokesman for HSBC, said the bank was "pleased to have resolved this issue".

All three banks received reduced penalties from the CFTC for providing significant assistance in the investigations, which relate to activity that dates back as far as 2008.

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