Spoofing went mainstream in 2015

By Matthew Leising
Bloomberg News
Tuesday, December 24, 2015

Inside Ken Griffin's $25 billion empire, Citadel LLC's cyber investigators had isolated a new enemy: spoofers.

It was late 2013, and at the firm's Chicago headquarters, a team of researchers discovered that a rival company's algorithm was outmaneuvering their automated trader. The algo was placing futures orders it had no intention of filling to entice firms like Citadel into the transactions, then canceling them, leaving Citadel with money-losing trades. Citadel's plan: to pit its computers against the spoofer in a high-stakes duel over market manipulation.

That the firm took matters into its own hands shows how deeply the electronic bait-and-switch scheme has penetrated the global marketplace -- and how slow regulators have been to root it out. The firm's efforts, disclosed in a court filing in November, enabled Citadel to detect suspicious orders and, in a blink, pull back from trading.

Citadel isn't the only one girding for battle. In London, New York, Washington, and beyond, 2015 will go down as the year that spoofing exploded into the financial lexicon. Whistles were blown. Convictions were made. And, in a twist, the financial players themselves stepped up to help outgunned regulators police the markets.

So far, the fight has yielded little. More than five years after the Dodd-Frank Act made spoofing a crime, the Commodity Futures Trading Commission sued just three traders for spoofing in 2015. And while the number of enforcement cases on CME Group Inc., which owns futures markets including the Chicago Board of Trade, doubled this year from 2014, there were only 16. ...

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