CFTC Fines Morgan Stanley Unit, Others for Spoofing

The U.S. Commodity Futures Trading Commission (CFTC) announced it had settled civil enforcement actions against several well-known companies for spoofing. The list included Morgan Stanley Capital Group Inc., Mitsubishi International Corp., and Belvedere Trading, LLC.

The three companies settled to pay $3M with no admission or denial of the claims presented by the CFTC, and as a result, received reduced fines for cooperating with the authorities.

Morgan Stanley Previously Involved with Spoofing Scheme

According to the commission, this is not the first time Morgan Stanley is involved in a scandal of this nature. Back in November 2013, the firm was sentenced to pay $1.5M in fines after one of its traders engaged in a spoofing scheme with COMEX.

Since then, the M.O. has come to light. Traders used to place a 'small' bid with the intent to execute that order, but before it could be done, they would cancel it.

Morgan Stanley initiated an internal investigation and fully cooperated with the CFTC's enforcement division to eradicate the firm of employees involved in unlawful activities. Additionally, the company affirms that they have actively engaged in remedial efforts to prevent this (and other types of misconduct) from happening in the future.

Consequently, new policies, procedures, training practices, and monitoring activities were set in place to "detect and deter potential spoofing misconduct and manipulative trading."

CFTC Says Mitsubishi’s Traders Also Previously Involved in Scheme

According to the CFTC, one of Mitsubishi's traders engaged in a similar scheme from April 2016 through January 2018. An employee intended to move the market to favor the orders the company planned to execute.

Mitsubishi, which was ordered to pay a $400,000 penalty, took action by suspending the trader and reporting him to the CFTC. Much like Morgan Stanley, the firm also conducted an internal review, launched an overhaul of its systems, and created a new trading compliance program.

Belvedere Trading LLC Ordered to Pay $1.1M

On the other hand, Belvedere Trading LLC was ordered to pay $1.1M for what the CFTC said were spoofing schemes. According to reports, two of the firm's traders engaged in unlawful activities between June 2014 and November 2015
—placing thousands of spoof orders over hundreds of occasions.

Furthermore, the CFTC announced on September 30th that it had filed and settled enforcement actions against other enterprises for similar spoofing schemes. These included Chicago-based Hard Eight Futures, LLC, and a company founder. Both related to more than 1,000 instances of spoofing on the CME's electronic trading platform between March 2014-2015.

As a result, Hard Eight and the founder were fined $1.75 million and $750,000, respectively.

CFTC Committed to Preserve Market Integrity

As these cases demonstrate, the CFTC is committed to preserving the integrity of our markets and to rooting out unlawful practices like spoofing. Moreover, the commission is ready to investigate and prosecute misconduct all companies and individuals.

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