'Spoofing'—the New Frontier for Criminal Prosecution?
In their White-Collar Crime column, Robert J. Anello and Richard F. Albert write: Even without its catchy name, the relatively new crime of "spoofing" would seem to appeal to prosecutors seeking to tap into the populist desire for prison time for perceived financial chicanery and the view that high-speed trading has rigged the markets against regular participants. Not surprisingly, therefore, the conviction last month in 'United States v. Coscia', the first criminal trial on spoofing charges, has generated a good deal of attention.
November 30, 2015 at 05:18 PM
11 minute read
Even without its catchy name, the relatively new crime of “spoofing” would seem to appeal to prosecutors seeking to tap into the populist desire for prison time for perceived financial chicanery and the view that high-speed trading has rigged the markets against regular participants. Not surprisingly, therefore, the conviction last month in United States v. Coscia,1 the first criminal trial on spoofing charges, has generated a good deal of attention.
Generally, spoofing is a practice, claimed to be manipulative, whereby a trader places and quickly cancels an order that the trader never intended to execute. The notion is that spoofing gives the market a false indication of genuine interest in trading at a specified price, improperly allowing the spoofer to profit on other traders' responses to this false information, often by placing a legitimate order on the other side of a large non-bona fide order. As a practical matter the conduct is focused in the realm of algorithmic trading, where computer programs are used to place and cancel orders pursuant to a defined set of instructions at extremely high speeds.
Congress expressly declared spoofing illegal in the commodities context in 2010 when it passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. The statute included no similar express prohibition in the securities context.
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