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Alternative Market Briefing

UK financial watchdog starts targeting high frequency traders

Thursday, August 01, 2013

Benedicte Gravrand, Opalesque Geneva:

The UK’s Financial Conduct Authority (FCA) last week fined US-based high frequency trader Michael Coscia $903,176 (£597,993) for deliberate manipulation of commodities markets. This is the first time the FCA has taken enforcement action against a high frequency trader.

According to the FCA’s announcement, Coscia used an algorithmic programme of his own design to instigate an abusive trading strategy known as "layering" during a period of six weeks in September and October 2011. He placed thousands of false orders for Brent Crude, Gas Oil and Western Texas Intermediate (WTI) futures on the ICE Futures Europe exchange (ICE) in the UK. As this generated price movements, he made $279,920 in profits by trading at the expense of other investors, especially other high frequency traders or traders using algorithmic and/or automated systems.

Coscia is not a member of ICE, nor is he an FCA Approved Person. He traded through from the US through a Direct Market Access (DMA) provider.

He agreed to settle early and received a 30% discount on the fine, which otherwise would have been more than $1.15 million (£764K).

In the US, the Commodities and Futures Trading Commission (CFTC) and the Chicago Mercantile Exchange (CME) also fined Coscia for similar manipulations on US markets, on the same day. ......................

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