♦Spoofing, Surveillance, Supervision, Training♦
Training on spoofing and other disruptive trading practices “… cannot be ‘check the box’ training. The programs need to be strong and periodically assessed and updated as this area of the industry evolves.”
That’s the conclusion of attorneys James Lundy and Nicholas Wendland, along with tech surveillance expert Jay Biondo, in their May article in the National Society of Compliance Professionals “Currents” newsletter. The article is in response to ongoing actions by the CFTC and DOJ against spoofing traders and their firms.
The authors agree that it is now standard operating procedure for regulators to investigate firms for failing to supervise and train traders suspected of spoofing and other manipulative practices.
The largest spoofing fine to date ($25 million) was accompanied by what the authors call “a bizarre twist.” In that action, three spoofing traders received “non-prosecution agreements” for cooperating by asserting that their firm failed to train and supervise them regarding spoofing.
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“As our developing spoofing case law demonstrates, this duty to supervise includes ensuring that employees receive sufficient training…”
CFTC Commissioner Rostin Benham, May 15, 2018
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Our Market Conduct course takes a deep dive into spoofing and other forms of disruptive trading (messaging violations, wash sales, market manipulation, pre-arranged trading, noncompetitive trading, front-running and insider trading). Anyone who accesses the markets directly or on behalf of others must understand the mechanics and consequences of these practices.
James G. Lundy is a Partner with Drinker Biddle & Readh LLP.
Nicholas A.J. Wendland is a Counsel with Drinker Biddle & Reath LLP.
Jay A. Biondo is a Manager, Trading Technologies.
