Nanex Research

Nanex ~ 28-Apr-2015 ~ Spoofing Gold Futures

Spoofing continues in many, if not all futures contracts dominated by High Frequency Trading (HFT) algorithms - in spite of CME's new "Disruptive Practices Prohibited" rule (which prohibits spoofing, among other forms of manipulation). Spoofing continues in spite of the recent, widely reported case brought by the Department of Justice against a trader for spoofing eMinis (ES) just before the flash crash.

It doesn't take much effort to spot many HFT spoofing algorithms in real-time. Here are 3 examples we easily found in the June 2015 Comex (CME) Gold Futures (symbol: GC) on the morning of April 28, 2015. All times are Eastern Daylight. In each of these cases, no trades (or a tiny few) executed against the large "spoof" order. You can see how prices were influenced by the sudden appearance (and disappearance) of these large, outsized orders.

To understand how spoofing works, be sure to read CFTC, Panther Hunter. A few other spoofing cases we've documented:

You may also be interested in reading the HTG Lawsuit against one or more HFT firm(s) for spoofing Treasury Futures: this is a lawsuit filed by one HFT firm against another and documents thousands of examples of spoofing in  U.S. Treasury Futures over a 20 month period.

Update 30-Apr-2015

It appears the CME identified the gold futures spoofer illustrated below, resulting in an immediate suspension (see CME notice here, and here).

1. June 2015 Comex Gold (GC). (how to read these charts).
Note how large buy and sell orders push prices up and down.

2. Another set of instances appear about 50 minutes after the first set (shown in chart 1).

3. Another set of spoofing instances appear about an hour after the second set (shown in chart 2).

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