CFTC accuses trading firm accused of profiting from “spoofing”

October 20 02:14 2015

A Chicago trading firm was charged Monday with profiting from alleged manipulation of futures markets through the improper practice known as spoofing. The Commodity Futures Trading Commission accused Chicago-based 3 Red Trading LLC and its CEO and principal trader Igor Oystacher with using spoofing schemes between Dec. 2011 and Jan. 2014 in trading futures contracts on the Chicago Mercantile Exchange, the New York Mercantile Exchange, the Commodity Exchange and the CBOE Futures Exchange.

The alleged spoofing, in transactions involving crude oil, natural gas, copper and other futures contracts, enabled Oystacher and his company to buy and sell “at price levels that would not have otherwise been available to them in the market,” the CFTC charged. “Spoofing seriously threatens the integrity and stability of futures markets because it discourages legitimate market participants from trading,” Aitan Goelman, the CFTC’s enforcement director, said in a statement announcing the allegations.

Filed in federal court in Chicago, the civil action seeks monetary penalties, as well as trading and registration bans. Oystacher and his firm characterized the allegations as “completely without merit” and said they “look forward to presenting our case in court.”

“The CFTC has over-simplified complex trading and is now trying to classify legitimate trading and risk management as a market infraction,” the defendants said in a formal statement. “We stand behind the trading at issue as it does not contradict available guidance nor violate the law.” The allegations mark the latest in a series of cases filed by regulators amid increasing scrutiny of alleged financial market spoofing and other forms of suspected manipulation by high-speed frequency traders.