On Monday, the Commodity Futures Trading Commission (CFTC) announced the resolution of charges against against Randy Chen, a California resident, and Tanius Technology LLC (Tanius), a California-based proprietary trading firm for spoofing in futures contracts on the Chicago Mercantile Exchange (CME). Chen will pay $150,000 and refrain from certain trading activities while his former employer Tanius is on the hook for $600,000 for vicarious liability.
According to the CFTC, Chen spoofed, or bid with the intent to cancel the bid before execution, on over 1,000 separate occasions from October 2020 to June 2021 in 12 CME futures contracts, primarily Treasury futures contracts. The misconduct reportedly occurred while Chen was employed with Tanius in an undisclosed role.
The CFTC’s orders explained that Chen’s “typical spoofing pattern” involved placing one or more small orders on one side of the market followed almost immediately by placing multiple 20-lot orders on the opposite side that he intended to cancel before execution. The small orders would get filed then Chen would cancel most of the 20-lot orders within five seconds, “occasionally repeating the process of placing and canceling multiple 20-lot orders until he had induced a fill on the opposite side,” the order noted.
Chen’s conduct violates the Commodities Exchange Act, which expressly forbids spoofing, the agency said. The CFTC also implicated Tanius, whom it said was vicariously liable for Chen’s misconduct.
The order against Tanius noted, however, that the trading firm was the one to bring Chen to the CFTC’s attention, firing him then reporting him once aware of his misconduct. Its self-reporting and cooperation combined with its voluntary adoption of a supervisory trading analysis tool to flag suspicious conduct drove down the fine, the CFTC said.
Lastly, the agency’s press release noted that the same day, CME Group announced disciplinary actions against both Chen and Tanius.