Citigroup Hit with $25m Fine by CFTC for Spoofing, Supervisory Failures

The U.S. Commodity Futures Trading Commission (CFTC) has just issued an order, effectively settling charges against Citigroup Global Markets Inc for its role in spoofing and unlawful Execution Execution Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Read this Term, resulting in a $25 million civil monetary penalty, according to a CFTC filing.

To unlock the Asian market, register now to the iFX EXPO in Hong Kong.

The enforcement action entails a prolonged period of spoofing, i.e. bidding or offering with the intent to cancel the bid or offer before execution. More specifically this entails Citigroup’s handling of US Treasury futures, which ultimately saw the group fail to properly supervise the activities of its employees and agents in conjunction with the spoofing orders.

2,500 Instances of Spoofing

The CFTC order also uncovered that five of its traders across its US Treasury and Swaps desks had engaged in spoofing more than 2,500 times in various Chicago Mercantile Exchange US Treasury futures products between July 16, 2011 and December 31, 2012.

As such, Citigroup’s traders had managed to place their spoofing orders to create or widen an imbalance in the order book, cancelling their spoofing orders. This also saw the systematic coordination of Citigroup’s traders with each other to foster the spoofing strategy.

In conjunction with the $25 million civil monetary penalty, Citigroup was also required to cease and desist from violating the Commodity Exchange Act’s prohibition against spoofing and the CFTC Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term governing diligent supervision.

Supervisory Failures

Ultimately, the CFTC order determined that several supervision failures with regard to spoofing were evident, propagated by insufficient training about spoofing to traders on its US Treasury and Swaps desks – in this particular instance, the majority of Citigroup’s traders were given only rudimentary correspondence about spoofing, culminating in a single alert with ‘anti-spoofing’ language.

That Citigroup did also not possess adequate systems and controls to allay or detect spoofing by its traders on its desks also contributed to the issue. Finally, even when relevant alerts were given with regards to spoofing, involving one of the company’s own traders, its respective supervisor and other members failed to comply with existing policies designed to report violations.

According to the CFTC’s Director of Enforcement Aitan Goelman in a recent statement on the order: “Spoofing is a significant threat to market integrity that the CFTC will continue to vigorously investigate and prosecute.”

“Additionally, as this action shows, registrants with supervisory responsibilities must provide their employees with sufficient training and have in place adequate systems and controls to detect spoofing. Failure to do so will have significant consequences,” he added.