November 8, 2019, | AtoZ Markets – High-speed trading firm Tower Research Capital LLC agreed to pay $67 million to settle regulatory allegations. This is because its traders have allegedly manipulated the price of stock-index futures.
New York-based Tower also signed a deferred-prosecution agreement with the Justice Department, which has worked closely with the CFTC on such cases.
CFTC Charges Tower Research Capital With Alleged "Spoofing"
The alleged misconduct is known as spoofing. This involves entering phony orders that give other traders a false impression of supply and demand. The fake bids and offers are intended to push prices in a direction that favors the spoofer’s other orders.
Moreover, the fraud allegedly occurred in 2012 and 2013 when the traders, all part of the same team, placed thousands of misleading orders in E-mini S&P 500 futures. This is a heavily traded contract that tracks the S&P 500 stock-market index. Investors often use it to hedge against major market moves.
Prosecutors and the CFTC have cracked down on spoofing in recent years, saying this tactic is a form of fraud. Additionally, Congress outlawed spoofing in the 2010 Dodd-Frank Act. CFTC enforcement director James McDonald said:
“This misconduct undermines the integrity of the price discovery process and can result, as it did here, in harm to law-abiding market participants.”
Tower’s payment includes $32 million in restitution, $10.5 million in disgorgement of illegal profits, and a $24.4 million penalty.
The CFTC has filed or settled more than a dozen spoofing cases in 2018. Meanwhile, the Justice Department is still pursuing some of those traders on criminal charges.
About Tower Research Capital
One of Tower Research’s subsidiaries, Latour Trading LLC, is a major liquidity provider on the New York Stock Exchange, according to NYSE’s website. Tower Research Capital’s founder, Mark Gorton, recently stepped down as CEO of the company and became a nonexecutive chairman. Mr. Gorton earlier founded the music-sharing service known as LimeWire. However, authorities have shut down LimeWire for copyright infringement.
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