The Commodity Futures Trading Commission (CFTC) today announces that Deutsche Bank, UBS and HSBC, will collectively pay over $47 million in civil settlement for engaging in spoofing in the precious metal markets in an investigation that dates back to 2008.
It was part of a joint investigation in coordination with the Department of Justice and Federal Bureau of Investigation that also charged certain individuals with commodities fraud and spoofing.
Deutsche Bank will pay a $30 million civil monetary penalty for spoofing and manipulation, making it the biggest fine associated with spoofing in history. UBS will pay $15 million in fine for spoofing and attempted manipulation. This penalty reflects a significant reduction as a result of the bank’s cooperation with the authorities, which includes filing a self-report at the initial stage of the investigation. HSBC will pay a civil monetary penalty of $1.6 million for engaging in numerous acts of spoofing with respect to certain futures products in gold and other precious metals.
All three banks cooperated with the investigation, according to the CFTC and FBI’s Criminal Investigative Division.
Spoofing involves placing buy and sell orders with the intent to cancel them before completing the transactions. Traders are able to distort the market’s demand and supply by placing hundreds, in some cases thousands, of spoof orders to induce other market participants to trade at prices, quantities or times they otherwise would not have traded. As a result, spoofing allows the traders to take opposite orders and benefit from the markets’ reactions.
In addition, the Justice Department charged six individuals involved in commodities fraud and spoofing schemes. The traders face accusations for manipulating various futures markets, including S&P index and precious metals.
James McDonald, the CFTC's enforcement director noted in the release, “These cases should send a strong signal that we at the CFTC are committed to identifying individuals responsible for unlawful activity and holding them accountable.”
For more information, click here to read the official press release.