Published On: November 19, 2015

The U.S. attorney’s office in Chicago is cracking down on “spoofing.” Spoofing is an illegal practice in which traders profit from placing orders they intend to cancel, at times only milliseconds later. Chicago is at the epicenter of the futures market, and therefore, is emerging at the forefront of the criminal and civil litigation in this matter. Earlier this month, in the U.S. District Court in Chicago, the first criminal conviction of a spoofer was won. The Commodity Futures Trading Commission is pressing civil spoofing charges against a Chicago trading firm and the CFTC lodged civil charges last month against Chicago-based 3Red Trading and its owner, Igor Oystacher. Firms such as Citadel, Jump Trading, DRW Holdings and Allston Trading have made Chicago a hub for high-speed trading and are aggressive in worldwide financial markets. One recent example was Panther Energy Trading’s Michael Coscia, who was found guilty by a jury on 12 criminal counts on November 3rd, and his case hinged on content, as he admitted that he cancelled tens of thousands of orders over a nine-week period in 2011.

Rival firms are bringing each other to court on spoofing charges and incriminating each other. Citadel filed multiple complaints with the CFTC and CME regarding anonymous trading that was traced to 3Red. Citadel claimed they lost millions of dollars as a result of 3Red’s actions. The firm also complained about Panther’s trading and a Citadel employee testified for the prosecution in the Coscia trial. High-speed firms are suing each other in Chicago federal court, as well. HTG Capital Partners sued “John Doe” over spoofing and is trying to reveal the name of the culprit.

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