Banks Settle Charges of Commodities ‘Spoofing’ for $46 Million

(CN) – Deutsche Bank, UBS and HSBC will pay a combined $46.6 million in fines to settle claims that some of their traders manipulated the price of precious metals, including silver and gold, in the futures market, government regulators said Monday.

According to the Commodity Futures Trading Commission, or CFTC, Deutsche Bank will pay a civil monetary penalty of $30 million, UBS will pay a fine of $15 million and HSBC will pay $1.6 million to resolve charges that the banks manipulated the market through traders who used an illegal practice known as “spoofing.”

Outlawed by financial regulations under the Dodd-Frank Act, spoofing uses complex computer algorithms to allow futures traders to manipulate markets by quickly placing and canceling orders, creating artificial supply or demand that tricks other traders into buying or selling.

In these cases, the CFTC says traders placed large orders to buy or sell precious metals futures contracts that they had no intention of filling, and then profited by buying or selling other orders when the price was driven up or down.

The penalties are part of broader civil and criminal enforcement actions against three banks and individual traders charged in several different federal courts with manipulating the metals futures market.

In reaching their respective settlements, Deutsche Bank, UBS and HSBC did not admit any wrongdoing. The regulatory agency said that each bank had cooperated with authorities.

James McDonald, the CFTC’s division of enforcement director, called spoofing “a particularly pernicious example” of market manipulation through the use of new technologies.

“As these cases show, we will work hard to identify and prosecute the individual traders who engage in spoofing, but we will also seek to find and hold accountable those who teach others how to spoof, who build the tools designed to spoof, or who otherwise aid and abet the wrongdoing,” McDonald said in a statement.

The Justice Department also announced Monday that it had charged eight individual traders with spoofing or market manipulation.

“Conduct like this poses significant risk of eroding confidence in U.S. markets and creates an uneven playing field for legitimate traders and investors,” Acting Assistant Attorney General John Cronan said in a statement. “Protecting the integrity of our markets remains a significant priority in our fight against economic crime.”

HSBC USA spokeswoman Tala Booker said the bank is “pleased this matter is resolved.”

Deutsche Bank and UBS did not immediately respond Monday to requests for comment.

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