Three former Citigroup Inc. traders who admitted to "spoofing" U.S. Treasury futures markets will avoid sanctions after they cooperated extensively with a broader investigation by Wall Street's main derivatives regulator.
Jeremy Lao, Daniel Liao and Shlomo Salant won't receive penalties for manipulating markets in 2011 and 2012 because of their help in the agency's pursuit of other wrongdoers, the U.S. Commodity Futures Trading Commission said in a statement Thursday. The three entered into the commission's first-ever nonprosecution agreements, in which the government said it will drop wrongdoing claims as long as the targets fulfill certain obligations.
"These traders readily admitted their own wrongdoing, identified misconduct of others, and provided other valuable information, all of which expedited our investigation and strengthened our cases against the other wrongdoers," James McDonald, head of Commodity Futures Trading Commission enforcement, said in a statement.
Citigroup was fined $25 million by the commission in January for failing to adequately supervise its traders and for not having systems in place to detect spoofing, which involves entering fake orders to trick others into thinking prices are poised to rise or fall.
The use of nonprosecution agreements signals how the commission may police securities laws under its new enforcement chief. McDonald, a former federal prosecutor in Manhattan who joined the regulator in March, said he expects the practice to become an important part of his division's cases going forward.
The traders were taught to manipulate markets by senior traders, according to the commission. The three illegally profited by placing large orders they planned to cancel to fill smaller orders at favorable prices, the commission said. The bigger orders would typically induce algorithmic traders to act on the smaller orders.
Business on 06/30/2017