High frequency trader charged with spoofing manipulation by the U.S. Justice Department

A high-frequency trader was indicted for “spoofing” which is placing and immediate canceling orders as a way to manipulate the markets - the U.S. Justice Department says is the first criminal case of its kind.

Michael Coscia, 52, of Rumson, New Jersey, the principal of Panther Energy Trading LLC, was indicted by a federal grand jury in Chicago and charged with six counts of commodities fraud and six of spoofing. He’s accused of illegally reaping almost $1.6 million as a result of orders placed through CME Group Inc. and European futures markets in 2011.

The anti-spoofing statute is part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. Some trading firms have found the definition too vague and pressed CME to be more specific, two people familiar with the matter said last month.

Coscia’s attorney, Richard Reibman, said in an e-mailed statement he was reviewing the indictment and that it would be “premature” to comment on it. Coscia’s arraignment isn’t yet scheduled.

Spoofing Profit

The CFTC won a consent order from a federal court requiring another trader, Eric Moncada, to pay $1.56 million to settle allegations that he entered noncompetitive trades and engaged in spoofing in wheat futures markets. Moncada, who was barred from trading any wheat contract for five years, neither admitted nor denied wrongdoing, according to the order.

CME Group, operator of the world’s largest futures market, instituted a rule against the practice on Sept. 15.

‘Avoid Execution’

“No person shall enter or cause to be entered an order with the intent, at the time of order entry, to cancel the order before execution or to modify the order to avoid execution” in an effort to prohibit “the type of activity identified by the Commission as ‘spoofing,’” CME told the CFTC in a letter.