High-frequency oil trader fined for runaway trades

Fri Dec 23, 2011 1:35pm EST

(Reuters) - CME Group Inc (CME.O) fined a trader $50,000 for running a rapid-fire trading strategy that malfunctioned last year, sending thousands of erroneous orders to the New York Mercantile Exchange and sparking a $1 surge in oil prices.

The trader, Neil Brookes, was live-testing a computer-based trading strategy for Chicago-based Infinium Capital Management on February 3, 2010, when an error in the computer file caused it to enter 6,767 one-lot orders for crude futures contracts in just three seconds.

The error generated a million-dollar loss for Infinium, which earlier this year was fined a total of $850,000 for the 2010 error as well as two other computer-trading malfunctions in 2009.

Brookes had relied on an Infinium order control safety system to shut down any uncontrolled orders, but the system did not function properly, the CME's business conduct committee found.

"Although Brookes had no responsibility for creating, maintaining, or supervising that safetysystem, he was responsible for entering the trades in question," CME said.

Brookes, who did not admit or deny the rule violation, was barred from trading on any CME exchange through January 30.

Infinium, run by Chief Executive Charles Whitman, is a household name in Chicago's trading community and a member of the Futures Industry Association's Principal Traders Group, a lobby group for high-frequency traders.

Neither Whitman nor Brookes could be reached for immediate comment.

(Reporting by Ann Saphir; Editing by Tim Dobbyn)