• Exchange can submit customer lists to Chicago court under seal
  • HTG seeking to identify entities behind thousands of trades

CME Group Inc., the world’s largest futures market, must reveal the identities of customers suspected of manipulating markets, part of a legal battle against “spoofing” begun by one of Chicago’s best-known trading firms.

U.S. District Judge Edmond Chang, who is presiding over a lawsuit filed this year by HTG Capital Partners LLC, ruled Sept. 29 that CME Group must tell him the identities of the trading firms accused of spoofing. CME will be permitted to hand over the information under seal, to the judge alone, according to the order.

HTG, run by Chris Hehmeyer, is seeking to identify the entities it says illegally engaged in spoofing, the practice of placing and canceling orders before they’re executed to manipulate markets. In the lawsuit, HTG produced a list of 6,960 instances when it was allegedly tricked by spoofers in 2013 and 2014. 

Futures trading is anonymous, so HTG must get the identities from CME, the only entity that knows both parties to a transaction.

Chang said CME must provide HTG’s lawyers with a table of those entities identified by number, but not by name. CME and one unidentified defendant had told the judge they shouldn’t be compelled to reveal the names of the counterparties. 

Hehmeyer is the current chairman of the National Futures Association, the industry’s self-regulatory organization.

Spoofing has become a growing concern for regulators after the 2010 Dodd-Frank Act made such trading illegal. Navinder Sarao was indicted in August by U.S. prosecutors for allegedly spoofing on the day of the flash crash in May 2010, when more than $1 trillion in value of U.S. equities was temporarily wiped out. Sarao, who is fighting extradition from the U.K., has denied wrongdoing.

The HTG case began as a private arbitration at CME last year. In that process, CME told HTG that Allston Trading LLC was its counterparty in some Treasuries futures trades that HTG said were conducted unfairly, people familiar with the matter said last year. HTG sued in federal court when it decided the arbitration process wasn’t the best means of pursuing its case, the people said.

The case is HTG Capital Partners LLC v. Doe(s), 15-cv-02129, U.S. District Court, Northern District of Illinois (Chicago).

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