Igor Oystacher was fined $125,000 for disruptive trading on a U.S. exchange, the second recent case alleging he engaged in a banned practice called spoofing.
Intercontinental Exchange Inc. penalized the co-founder of Chicago-based 3Red Group on Friday, according to a filing posted to the National Futures Association’s website. The document described a form of market manipulation known as spoofing -- or placing fake orders that spook other traders into moving prices one way or another -- involving futures contracts on the Russell 2000 Index.
“We determined to settle this matter after considering the cost of continued litigation, with no assurance of a reasonable outcome,” Tom Becker, a spokesman for Oystacher at Sitrick & Co., said in an e-mailed statement. “There were no reasons to settle this matter beyond that simple cost consideration.”
Brookly McLaughlin, an ICE spokeswoman, declined to comment. Oystacher neither admitted to nor denied the exchange’s findings.
The ICE disciplinary action was announced six months after another U.S. futures giant, CME Group Inc., fined Oystacher $150,000 and barred him from using its exchange for a month.
Oystacher co-founded 3Red with Edwin Johnson in 2010. They were subpoenaed in 2012 as part of market manipulation probe by the Commodity Futures Trading Commission, Bloomberg News reported in November. The probe came to light as part of a lawsuit Johnson filed in June against 3Red’s law firm alleging a conflict of interest.
ICE said Oystacher’s improper trading took place between September and December 2012. He was “engaging in a pattern of trading activity where he would enter buy or sell orders on one side of the market at different price levels and subsequently cancel such orders in close time proximity to trades the respondent executed on the opposite side of the market,” according to the ICE notice.
While decades old, the practice of spoofing is garnering new scrutiny as interconnected and lightning-fast electronic trading makes it easier and more damaging.
CME said last year that Oystacher posted orders for futures contracts on crude oil, silver, gold and copper that he didn’t intend to execute. The alleged violations in oil occurred from December 2010 to July 2011, while the other trades took place from May 2011 to July 2011, according to CME.
Oystacher neither admitted to nor denied CME’s allegations. Becker, his spokesman, gave the same statement for this case as he’d given for the ICE case.
There are multiple complaints by traders and investors about spoofing on U.S. markets every week, according to the CFTC’s head of enforcement. The most high-profile case of alleged spoofing to date involves Navinder Sarao, who was arrested in April and accused of contributing to the flash crash in 2010, when nearly $1 trillion was temporarily erased from U.S. stocks.