CME permanently bans three traders for spoofing, other violations

CHICAGO (Reuters) - CME Group Inc has permanently banned three traders who admitted to violations including the manipulative strategy known as spoofing, according to disciplinary notices issued on Monday.

A permanent ban is a severe punishment that CME, which owns the New York Mercantile Exchange, Comex and other markets, does not often impose on traders who break the rules. The exchange operator more commonly uses fines and trading suspensions to discipline rule breakers.

On multiple occasions from February to April 2013, a trader named Nitin Gupta repeatedly entered large orders for crude oil, gold, silver and copper futures contracts without the intent to trade, according to CME.

Nitin entered the orders to encourage others to trade opposite smaller orders that he had resting in the markets, the company said. After receiving a fill on his smaller orders, Nitin would then cancel the large orders, CME said.

Such moves are commonly called spoofing, a strategy in which a trader tries to create a false appearance of market interest by placing orders and then immediately canceling them.

CME fined Gupta a total of $150,000 in addition to imposing a ban.

The exchange operator separately fined a trader named Libin Zhou $100,000 and imposed a trading ban. Libin improperly bought and sold crude oil futures opposite an account owned by his employer on 48 occasions between May and June 2013, according to CME.

In another violation, a trader named Rajasekaran Veeramuthu and a colleague in 2012 improperly entered a series of trades in silver options between accounts with the same beneficial owner. The practice of acting as buyer and seller in the same transactions is known as wash trading.

CME fined Veeramuthu $50,000 in addition to imposing a ban.

None of the traders could immediately be reached for comment.

The three traders were “deemed to have admitted the charges issued,” according to CME. On Sept. 9, CME panels found they had committed the violations.

None of the traders were CME members, according to the company.

The practice of spoofing is under scrutiny after the U.S. Justice Department and Commodity Futures Trading Commission earlier this year accused London-based trader Navinder Sarao of using spoofing tactics at CME that ultimately contributed to the 2010 Wall Street “flash crash.”

Sarao has since been indicted and is fighting efforts by the United States to have him extradited to face trial.

Reporting by Tom Polansek; Editing by Steve Orlofsky