Section 4c(a)(5)(C) of the Commodity Exchange Act prohibits the disruptive trading practice called “spoofing” (bidding or offering with the intent to cancel bids or offers before execution.)

Spoofing violations follow a similar pattern. The “spoofer” (Anju Singhal in yesterday’s Commodity Futures Trading Commission (CFTC) enforcement action, CFTC Docket No. 18-11) enters into a transaction — the spoofed transaction — that it intends to cancel before execution (in Sinhal entering larger limit orders on one side of the market.)

The spoofed transaction is used to bait the market into acting on the transaction that the “spoofer” really wants to occur (in Singhal a smaller, aggressive order — a market order — on the opposite side of the market.)

Once the market reacts, the spoofer pulls the bait to which the market reacted (in Singhal all the large orders were cancelled without any part of the order being filled.)

If the spoof works, the “spoofer” often repeats the spoof. (the CFTC said Mr. Singhal repeated this particular trading pattern numerous times and had previously been fined/suspended for spoofing.)

The Singhal spoofing penalty; $150,000 fine, 4-month suspension.

Bob Fallon, 202 464-1331,