A South Korean brokerage and investment banking firm settled CFTC charges on behalf of a recently acquired securities subsidiary that engaged in spoofing.
According to the CFTC, the securities subsidiary spoofed bids on the S&P 500 Index futures contract that were traded on the Chicago Mercantile Exchange in order to create a misleading impression of market depth and therefore induce other market participants to trade opposite the orders.
To settle the charges, the South Korean parent agreed to (i) cease and desist from violating CFTC regulations, (ii) pay a civil monetary penalty of $700,000 and (iii) comply with certain remedial undertakings outlined in the offer. The CFTC noted that, as a result of the parent firm's cooperation, the civil monetary penalty was reduced.
Commentary
From a procedural standpoint, it is notable that the CFTC held the South Korean parent company responsible for violations committed by a single Seoul-based trader even though it had nothing to do with the violations, and was not the owner of the firm when the violations occurred. While the Order states that the civil penalty was reduced to credit the parent company's cooperation, it is impossible to tell from the Order or the accompanying press release how much that cooperation was worth.
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