WASHINGTON, D.C. — The Commodity Futures Trading Commission announced today it issued an order filing and settled charges against Brett Falloon and Flatiron Futures Traders LLC for spoofing in the E-mini S&P 500 and E-mini Nasdaq 100 futures markets on the Chicago Mercantile Exchange.
Falloon and Flatiron must pay, jointly and severally, a $200,000 civil monetary penalty. Falloon is also banned from trading commodity interests for 12 months. Both parties were ordered to cease and desist violating the spoofing prohibition in the Commodity Exchange Act.
The order finds that from May through December 2022, Falloon engaged in spoofing while trading on Flatiron’s behalf by placing bids and offers with the intent to cancel them before execution.
Falloon’s trading followed a pattern: He placed genuine orders that he intended to execute on one side of the order book while entering the spoof orders he planned to cancel on the opposite side. Once his genuine orders were filled, he canceled the spoof orders. His genuine orders were often aggressive, meaning they crossed the bid-ask spread and were immediately filled.
Falloon’s spoof orders usually constituted a large percentage of orders resting at the top price levels. The aggregate number of contracts in his spoof orders outnumbered the contracts in his legitimate orders 5-to-1.
The order also finds Falloon placed the spoof orders with the intent of misleading other market participants. His conduct induced other traders to either cross the bid-ask spread to fill his genuine orders, or place resting orders at the best offer, allowing Falloon to fill his genuine orders faster, in larger quantities or at more favorable prices.
The CFTC thanks CME Group Inc. for its assistance in this matter.
The Division of Enforcement staff responsible for this action are Michelle Bougas, Brandon Wozniak, Brian Hunt, Kathleen Banar, and Paul Hayeck, as well as former Division of Enforcement staff Erica Bodin and Deputy Director Rick Glaser.